Seeking words of wisdom. How to structure a 15 prop. owner financ

4 Replies

Hi there Bigger Pockets ,

I'm just freshly out of my first training classes as a new real estate agent . I'm very new to real estate investing. I just recently ran into what I think  would be an amazing opportunity. So I'm trying to acquire 15 residential properties owned by a tired landlord. I'm trying to figure out what would be the best option to structure a deal with the owner. I know cash would be a perfect option. But if I can't raise the cash to buy all the properties, I've heard about owner finance with a balloon payment at the end of an agreement made. Has any body done this type of creative deal? Properties are about 60K a piece = $900K in total. Properties are not in the best shape and landlord does not want to do any repairs. I would be buying them at a discount. My plan is to rehab and flip them. I guess what I'm trying to figure out is how to present an offer that will be enticing to the owner where they would feel comfortable doing an owner financed agreement with me. Any insight would be greatly appreciated.

Thank you

Greetings @Salvador Benavides !

Here are a few of the ways we have structured seller finance:

1. Seller carry back: The seller holds back the down payment and you obtain the rest of the purchase price using a bank note. This is nice as the seller gets the bulk of there money (especially if the houses are paid off) and you don’t have to put anything (or all 20% down). Downside is you are highly leveraged and cash flow could be an issue.

2. Repair Credit: You agree to pay $5k more per house then what the seller is asking, however at closing you get this money as part of a ‘repair credit.’ The houses have to appraise at that level, but they ‘usually’ appraise for the sale price. This would give you $75k in cash use to rehab/pay a bridge investor. Your loan costs will be a bit higher.

We have used both of these methods to varying effectiveness.

Good luck!

AJ

@Salvador Benavides   As a brand new agent, this seems like you might bite off a lot more than you can chew. 

Do you know enough about assessing the condition of all 15 buildings to know what your repair / update costs will be - and if the numbers make sense after that spend?

Looking at your title (H/T to the Beatles), I think your answer is there.  Seeking words of wisdom...Let it be.

@Charlie MacPherson

I have a business partner that is a contractor that will be evaluating the properties with me. Then I will run comps to see if the numbers make sense. My worry was pretty much on how to acquire the properties as all cash is not an option for me. But like I mentioned above to Mr. Aj, I have another agent friend who is more experienced that I will probably bring into the deal. I just wanted to see if anyone here has had a similar situation to where they implemented a creative way to make it work.

Thank you Mr. Charlie for your feedback.