BPrs that bought apartments using owners 20%

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Looking for info from BPrs that bought apartment building using owner financing 20%

Looking for the proper way to write offer asking owners to finance the 20% needed to buy apartment building.

Offer 1.3m, would like owner to finance 300k,( Actually 23%)at 8% interest only for 5 year balloon.

I Have never asked or done a deal this way, want to make sure I get it right the 1st time

Any suggestions or help of any kind would be greatly helpful.

Thanks

Mike 

@Mike Campbell

A few quick questions. Let me see if I got this correct based on your post

Purchase Price $1,300,000

Is the bank loaning you 70% or 75%? You did not state how much the bank is loaning in your post. 

If they are loaning 70%, the down payment required is $390,000. If the owner is financing $300,000 of that amount, you are putting $90,000 down. Is that correct?

Have you checked with your lender to make sure they will allow an owner second for that much?

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You can actually get a private loan for 20% down for a loan that size. 

When writing your offer, regardless of how much you are asking the seller to carryback, and assuming you're getting 1st TD financing, the way to write the offer is the ask the seller  in a separate addendum paragraph to cary X$ @ Y% interest for a term (pick the number of years with our without a ballon) which is "Subordinate to buyers other financing at the close of escrow".

I structure it that way so I have flexibility in how the senior debt is stacked e.g. bank 1st TD, HML 2nd TD (to improve and payback relatively quickly) and the sellers. Some sellers might balk at this structure, but since they've already agreed to my addendum paragraph they would risk being in default of the agreement if they didn't proceed to closing.

Many times the sellers, or the sellers agent, will insist that the financing is identified in the agreement. In those cases you can either propose the structure mentioned above if there is a need, or desire, for more than one loan, or simply just change the paragraph language to have the sellers carryback subordinate to a lenders 1st TD financing, and you my need to list the actual amount of the 1st TD note.

Originally posted by @Anthony Gayden :

@Mike Campbell

A few quick questions. Let me see if I got this correct based on your post

Purchase Price $1,300,000

Is the bank loaning you 70% or 75%? You did not state how much the bank is loaning in your post. 

If they are loaning 70%, the down payment required is $390,000. If the owner is financing $300,000 of that amount, you are putting $90,000 down. Is that correct?

Have you checked with your lender to make sure they will allow an owner second for that much?

 Anthony;

Thank you for your reply;

Yes Offer 1.3m, Yes I will be getting a loan from the bank on the remaining, 1.M. and no I have not spoken to me bank regarding this offer, I have spoken to them regarding the property and they like the deal, they currently hold all my property, but, I don't have enough for the 20%. I will find out Monday if they will go for it.

Mike

Originally posted by @Rita Bautista :

You can actually get a private loan for 20% down for a loan that size. 

 Rita;

Thank you your reply;

At this time I would have to refinance all my properties to 80%LTV, My bank that currently hold all my properties and I feel that's a little risky at this point, I tend to lean conservatively on the properties.

Mike