Hello BP! I am 22 and I am not currently in a position to traditional finance through a bank. So, over the past year and a half I've been looking on and off market for potential properties (residential and commercial) that fall in the category of owner financing. Ive made dozens of offers but I have just not found that right property as of yet!
Over the past year and a half I've also networked with a lot of real estate professionals, one of which lead me to these commercial units where the owner is willing to finance. He is asking 285,000(OBO) for each building, wants to sell both.
Each building has an upstairs unit and a down stairs unit. Top is 1300sqft, bottom is 1000sqft.
I also have a tenant that would like to own about 25% of the deal and have the top floor office space.
My question is, how do I structure this deal to be a win win for all parties involved?
I'd really appreciate any response or advice on structuring a deal like this one!
Property?:........ Size? Condition? Location? Leases rate and terms? Market rent? Owner obligations per leases? Deferred maintenance? When and how much are capital expenses expected? Current debt with terms? Are these on separate tax maps? And more. This part is quick and easy.
How long has he owned? What's his basis? What benefit is he seeking for his equity? What's obligations is he wanting out of? Could he add more property to deal? Can he add cash if you brought him a property that gave him correct benifits with and obligations? Does he go to bank and borrow money on bigger deals? Would he lease back empty space for some time if he got his price? Does he have a big tax burden? Would more tax shelter benifit him? And more....? Spend more time talking about this. Knowing all about owner help you formulate offer in most cases.
Situation?: Why is he selling? What's his motivation? Where is he going with his equity? Is there a problem to be solved? Are there issues with tenants, partners, or the bank? Will cash solve his problem? How much? Could seller take equity with no cash flow but big upside? And more....? Discuss this for as long as you can think of questions to ask. If there wasn't a situation, proposal wouldn't be for sale.
Solution?: .....Comes from long, multiple, discussions and tons of asking questions and listening. Buying all cash quick doesn't require a relationship to be formed. However, sellers that finance need the comfort of knowing their borrower. It is like dating. Slow and easy discussions with you listening, questioning, and taking notes. Face to face like a counselor would do. Become the seller's real estate investment counselor, and you'll buy with seller financing.