How do I structure this partially seller financed multifamily?

Question

Have a commercial property I am ready to offer on asap here, will be seller financed for 20% and I have no experience in this so not sure how to set up the contract for the seller portion. Details are they will hold 20% but only for 5 years max. so with that short a term do I offer interest only payments to them and then just refi and payout the balance at the end of the 5 years? Or what would other options be? I need to figure this out asap so would appreciate prompt feedback. Would prefer an email or pm, email is in my profile.

Thanks guys!!

Shaun

Thanks guys!!

Shaun

Jeff Kehl · Answer

I've done several deals like this recently. We just include a 'seller to hold a 20% 2nd note for x%' in the purchase agreement. My lawyer then does a 2nd position note and security deed when we close and provides us both with an amortization table and payment amount. I do it fully amortizing over 5 years but you could do interest only or amortized over a longer period with a balloon.

I've found that if I fully amortize it tends to eat up all of the cash flow/make the property slightly negative cash flow but I like doing that so I'll be in a good equity position in 5 years.

Not sure how different this would be in Canada though... Whoever closes your transactions can probably advise you.