No Money Down Commercial Real Estate??

8 Replies

First off, I completely understand that no cash down seller financing happens in multi-family and MHP’s a fair amount. I myself have purchased 12 and 16 unit apartment complexes with no cash down. Actually the 16 was a $1000 down but the seller gave me over $14k in checks at closing. Has anyone done a no cash deal with mom and pop sellers on a strip mall or small office complex? Am I wasting my time mailing to these types of property owners? I’d love to hear some success stories and deal structures if you’ve done this.

Have not.  I can't imagine that in today's climate that would be easy.  I have run across strip owners that have wanted to get out and retire.  Those people have offered pretty attractive financing terms but always required some down payment.

@Brandon Hicks I have not done a commercial deal with zero down but have gotten a few good deals on them. Generally to get that you'd need a seller that is extremely desperate to get out. Was that the case with the residential properties you did it with? Why was the seller desperate and what did you do differently after you bought it?

Mostly the answer to that seems to be you had the capital to put into rehabbing the property to make it more attractive and then placed new tenants making the property a better hold. That's what I've done a few times.

But it becomes more interesting in commercial I think because just because you buy it and fix it up doesn't necessarily mean you will be able to place tenants and if you do it may be a long wait. There are some strip centers I've looked at recently where the current owners are probably desperate enough to take back some financing.

But they seem to have structural issues which I'm not convinced I would be able to turn around. Which would then turn me into the desperate seller...

@Jeff Kehl most of my residential purchases were from landlords that were either ready to retire, already had or just wanted to be done with the management for one reason or another. None of them were financially distressed. 

My 12 unit sellers were two partners that had been trying to sell for a few years. The property was physically distressed and as you said...I rehabbed and rented to better quality tenants for my turnaround. 

My 16 unit deal was a seller who was super savvy and wanted the structure to help with tax planning vs having the headache of a 1031 and another property to deal with in his retirement years. 

I have no doubt the commercial (multiple asset classes) deals are out there. They’re likely just a bit harder to find. 

In these markets now almost impossible. Sure it might be out there but 1 in 10,000 these days. You will need to put in your own time as it is not something a broker would hardly ever have interest in.

Buyers have to put down at least 10% even on seller finance as the seller typically wants the buyer down payment to cover commissions and closing costs.  

@Joel Owens I agree with that...I’ve avoided brokers/RE Agents when amassing my current portfolio for those reasons.

@Brandon Hicks I am curious, are the 14k in checks the rent deposits? I know for my company personally we need a min of 20% skin in the game but that is also because we do not need income docs and our debt coverage requirements are low (1.0-1.10 for multifamily) so that may have something to do with it. 

Personally if they were deposit checks I would not consider that money back because it is either given back to the tenant or used for repairs in the event of damage. Also keep in mind (depending on your market) that interest is due on these deposits as you hold them. 

@Michael Huck

In Indiana we can keep security deposits in our operating account and no interest is due. Some of it was deposits, some non-refundable pet fees and $5500 was for taxes due the next spring. 

This was a seller finance deal...the terms are whatever the two parties agree to. 

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