What is my best option for this deal?
I have a seller verbally agreeing to sell me an 8-plex for $265K. I have NOT had an appraisal done, but I can't imagine it would appraise for less than $300K. I thought the seller was interested in owner-financing the 25% down that I would need for a commercial loan, but he said to me on the phone today, "I just want to take the money and run." His exact words. He isn't as desperate as that makes him sound, but I still think $255K is a good deal for this commercial property. That being said, now that he is no longer interested in providing my 25% down that I need, I am trying to figure out what my options are for getting that money so I can secure a bank loan.
Anybody out there have some solid ideas on my possible options? THANKS!
@Chris Jackson I don't know what you're network is like but if the option is available to you, you could pool together OPM and structure some type of deal like that. Or perhaps bring in a partner?
Otherwise, if you have a personal residence and have the ability to use a HELOC or Home Equity Loan, that's another option.
Using hard money as well?
Or combining all of these? Just a couple options I thought of quick.. Hope this helps!
what do the rents look like? You can look for a private money lender who would be willing to issue subordinated mezzanine debt. But they're going to want a concise plan on how you're going to be able to pay them back
interesting. I don't know anything about mezzanine loans. could you explain a little?
So you're trying owner finance 25% and 75% conventional commercial loan, have you checked if a lender would lend to you if you had 0% skin in the property?
@Chris Jackson, first you said your verbal agreement was for $265k, then you wrote that you "still think $255K is a good deal for this commercial property". Was that a typo?
Don't be loose with $10k here, $10k there - especially if you were needing Seller finance.
If its appraisal comes in at under $300k, how is this a "deal"?
You're right: this Seller isn't desperate. That doesn't bode well for bargain hunters. Cheers..
Hi Chris,
Did he specifically state that he is unwilling to finance the down payment? Did you even ask him if he would finance the whole thing? Keep digging to find out his motivation for selling. Don't assume you are bothering him by asking for financing. Instead of dealing with tenants and toilets, he'll be collecting money each month after unloading what may be his headache property. Good luck!
thanks. I could ask if he wants to finance the whole thing but I imagine the answer is no since he said "I want to get the money and run" the last time we spoke. The 255 was just a typo but if he isn't willing to finance anything and I have to get this deal done without PM then I might renegotiate to 255K. UPDATE: I am waiting for a call back from a local bank. it sounds like they might be willing to finance this deal by making the sale price around 300K but building in 50K seller help and then letting me finance the rest of the down payment with my line of credit.
Chris,
Mezz debt is basically a subordinated debt position. There are a alot of private debt issuers that issue mezz debt and in my experience they are alot easier to deal with than the banks. With the private debt guys it tends to be conversational, you can turn a no into a yes if the deal is good enough, at most banks computers and algorithms are making the decisions so there isnt much "vision" (not sure if thats the right word). The trade off is the interest rate is ususally higher and the term isnt the traditional 25 year ammo, but its an option that could get you your asset.
@Jon Raccah thanks for that explanation. It makes sense. It looks like I might have a local bank giving me a "yes", but if not then I will have to check out the mezz loans to see how I cash flow.
No problem Chris. Good luck!
Find a someone to finance the 25% down and you operate the property. Give up some equity to get the deal done, your feet wet and start to build your portfolio. As the saying goes, a piece of something is better then nothing, especially when you don't have the cash. Good luck