Apartment Building - Seller Financing With Intent To Refinance??

Question

I am trying to get my foot into the door of real estate investing and have been trying to think of ways to secure my first apartment building!

My current thoughts are that I will find a property and purchase using seller financing. After 1 year the property will be refinanced conventional and the seller will be paid off.

What I'm wondering is will the payment history established with the seller secure a commercial loan when it comes time to refinance? Will I need to have 20% to put down when I refinance??

Curious to hear all thoughts !!

Charles Carillo · Answer

@Kyle John

Currently we are seeing for commercial bank refinancing LTV requirements of 65%-70%. If you are putting in the work of obtaining seller financing I would recommend you take it out as long as possible (preferably at least 5 years). You have to expect that your rents will not increase in one year and you will need to come up with the difference between the down payment you are making to the seller and the LTV on the refinancing plus you will need to show post closing liquidity which is traditionally 10% of the loan amount. For example; you purchase a $100k complex, you put down 15% and then when you refinance, you will need to come up with ~20% (if no increase in NOI) and show the bank that you have 10%+ ($6,500+) of the loan amount in another account that is liquid.

Dylan Thomas · Answer

@Kyle John Did you end up finding a deal?