I am looking at a $1.3m property that has several rental cabins on it. Currently, I only have about 60k liquid to make the deal, so will need additional investor. How would you structure your deal? My first thought is an LLC, with a partner putting in the rest of the down payment and giving them an equity position. The LLC would then apply for SBA financing, and we would arrange for an equity buyout of the other partner over a term.
Other choice is seller financing, but again will need assistance with coming up with enough down payment. Would you still do an equity position for this partner?
This property has very strong financials, and management/employees will stay in place.
This will be my first dive into the commercial side, so any suggestions/ideas are welcome.
It's hard to come up with a deal structure without having all the financial specifics. What do the numbers look like? What kind of debt service can it support? What's the cap rate at that price?
Seller financing is a good idea, but how much will he hold? How much do you need for the down payment, working capital, rehab, deferred maintenance, etc.? You need specific numbers so you know what the entire playing field looks like. Then you can determine if its even a doable deal. It might just be one that you broker for a profit. Do you have it under contract? There are 1000 questions that need to be answered.
Thanks for the "grounding". I guess I'm used to much smaller SFR deals where the aforementioned information on the financials is readily available, and dependent on ME, and therefore I already have an idea of how it is going to be structured. I am currently in process of acquiring all the needed information, and have to accept the fact that some analyzing needs to be done BEFORE deciding on best structure.
You must be a BiggerPockets member to post on the forums
Join the world's largest, most open Real Estate Investing Community online, 100% free forever!