Conroe, TX · Member since 2016 · 237 posts · 43 votes
I was evaluating a deal and they ended up switching to needing an all cash deal because the owner died and there are no financials for it, so banks will not finance it. I did contact my mortgage broker to see if there is an option through them, I am waiting to hear back. The purchase price is 399k.
I am working with a partner and we have access to 150k, but not 400k. Due to it being my pre first deal and not having a huge network yet, I don’t have other investors lined up. It could be a really fantastic deal.
Am I out of luck as it were or I am missing a place I could get the cash?
Going off market rents is useless. Without esstopal letters or leases you have no idea what the tenants are paying in rent, who is paying utilities, how long the leases are, whether tenants have any special deals etc. etc. You should run away from this deal or dig much deeper before you commit.
Take though time to dig and get the details and the bank will finance. If the seller is not willing to dig then they just cut the value of their property by 1/3.
Investor · Morrisville, NC · Member since 2012 · 1k+ posts · 673 votes
8y
@Daniel J. There are many ways to get cash from others. But it will be attached to conditions, depending on who you are getting the money from. Partner with syndicators (there are plenty of them here). Some might want to control the deal ... Some might want to purchase the deal from you ... etc. Have you reached out to hard money lenders? How about parents? Family? Friends? Co-workers? Cousins? People you know from the Gym , Church, etc ... Do you have a retirement account you can borrow from? ...
Lender · Central Florida Markets · Member since 2017 · 137 posts · 135 votes
8y
. Banks would require financials on you - not the seller. So the owners death should be irrelevant to them.
You can get a hard money lender if the banks turn you down- but that is a short term fix and expensive.
Investor / Lender · Seattle, WA · Member since 2014 · 1k+ posts · 730 votes
8y
What is your goal with this deal? Is it a primary residence? Is it going to be a fix and flip? Is it a fix and hold? Or is it already stabilized and doesn't require any rehab, i.e. you can rent it from day one of closing?
The answer to this will determine what loan options you have.
Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes
8y
If you don't have financials, how do you know if it's a deal worth investing In? I would walk from that situation and find more willing sellers elsewhere
Going off market rents is useless. Without esstopal letters or leases you have no idea what the tenants are paying in rent, who is paying utilities, how long the leases are, whether tenants have any special deals etc. etc. You should run away from this deal or dig much deeper before you commit.
Take though time to dig and get the details and the bank will finance. If the seller is not willing to dig then they just cut the value of their property by 1/3.
Investor · Morrisville, NC · Member since 2012 · 1k+ posts · 673 votes
8y
@Daniel J. Yes, some people I know have participated in my investments. But, I had to answer very tough questions and be very convincing. You really need to be well prepared, because they are risking lots of money.
In regards to your investment opportunity, It looks like there is just not enough information coming from the seller. You can't really know if this is a deal or not, can you? And banks are right to walk away.
Investor / Lender · Seattle, WA · Member since 2014 · 1k+ posts · 730 votes
8y
How many units is this property? You'll have more financing options with 1-4 units than 5+.
I'd argue that it is fair to go with off-market rents. You essentially intend to fix it up and put new tenants into the property, so the existing numbers aren't as relevant. Getting advice from a property manager in the area regarding rents would probably be better.
You can do a BRRRR strategy and lock it up with hard money, rehab it, rent it, and then refinance into a bankable loan. You can get in with as low as 10% down payment.
Rental Property Investor · San Jose, CA · Member since 2013 · 188 posts · 228 votes
8y
I’m assuming from you verbiage that it’s a commercial property (otherwise the bank wouldn’t need financial info in the property).
You can offer the owners a seller-financed purchase, with your putting 25% down. Then you manage the property for a year, at which point you should have sufficient documentation for a bank loan, & pay off the seller-financed loan.
But as others said, you really need to collect more info, & sounds like you’re going to have to do tot he hard way: If the sellers won’t give you leases, then go knocking door to door & get them from the tenants (& expect to come back to them with estoppels). Call the utility companies and figure out under who’s names the utilities are. Etc.
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
8y
@Daniel J. you don't need the financials, because you can use rent comparables. That is what an appraiser does. They look at comparable unit rents and using the income approach they can determine value. You should be able to pull together numbers for the bank. Use comparable for fair market rent. Call the utilities, get the taxes from the county and get an insurance quote. Put together a proper proposal for the bank and they will work with you. They will likely want an official appraisal as part of their due diligence, so make sure your numbers are conservative.
Conroe, TX · Member since 2016 · 237 posts · 43 votes
8y
@Hadar Orkibi I’m using a commercial mortgage broker in the Houston area. It’s 10 units, I thought I said that, but I guess I forgot to put that in there whoops!
@Andrew Syrios That was my thought, I guess I wasn’t sure how to go about that well, “last minute” and not specifically knowing of a private lender.
Rental Property Investor · San Ramon, CA · Member since 2017 · 350 posts · 611 votes
8y
hard money lender is your way to go for an empty 10 unit property. That's what I did for a 16 unit that was empty. get tenants in at market rents or slightly below, build a track record, trailing 12 then refi at a lower interest rate with a regular bank loan.
Make sure you cash flow with the terms/interest rate with a hard money lender. When you refi, the cash flow is gonna be higher as debt costs goes down. You can possibly rehab one unit at a time as people move out after refi, with maybe some cash out at refi. rehabbing from the start delays rental income and could put you in a tough position financially and lenders don't like that.
@Hadar Orkibi I’m using a commercial mortgage broker in the Houston area. It’s 10 units, I thought I said that, but I guess I forgot to put that in there whoops!
@Andrew Syrios That was my thought, I guess I wasn’t sure how to go about that well, “last minute” and not specifically knowing of a private lender.
My best recommendation is sit down and write out a list of 10 people you know who might have money to lend. Then, if you can do that, try writing down 20. Put together a package on your business strategy and any experience you have and a lending packet on the property. Then ask them if they'd have any interest and if they would be willing to talk about it over lunch. Good luck!
Investor · Greenville, SC · Member since 2012 · 269 posts · 187 votes
8y
Do not just walk away from this investment because information isn't readily available to you. It's entirely possible that you have a potential opportunity here.
A few notes regarding points I've read so far that I strongly (respectfully) disagree with:
Current financials on the property are absolutely relevant as the bank will want to see what income the property generates.
That said, you shouldn't walk from an investment just because you can't get financials. This strikes me more as an opportunity for you than as a problem. You could be looking at getting the property for a significantly discounted price because some information is harder to get. I don't know your area, but multifamily rentals don't have much problem filling up right now in a lot of areas.
You can absolutely use market rents to underwrite the deal, provided you can get inside the units and see if they are up to par for the market. That, or you could find out what it would take to get them up to par. Either way, you should definitely look at what the property could generate by running a conservative market rent analysis.
Keep working to find funding. You "may" be able to find a lender who will lend to you on a distressed deal if you put the $150k down, which would be close to 40%. I bet there's a hard money lender in your area who would look at it to give you short-term, bridge financing. Cash partner would be preferable, though. Just keep searching.
Y’all have given me the boost I needed to at least look into my other options and see what we can make happen!
So here’s another aspect that’s concerning. They want to do 30 days to close, 3 day option period (no option fee though) and 20k in earnest money. Is that stuff as a newbie that should concern me? Obviously less room to figure things out.
Rental Property Investor · USA / NZ · Member since 2016 · 1k+ posts · 812 votes
8y
Well, are they really want to sell the property or just playing up??
I can tell you one thing, never ever be motivated buyer! Allways be willing to walk away.
Buy from motivated sellers (I’m not sure they are), be flexible on terms but not on your numbers and criteria.
If they want Ernest money, to show good will, consider giving it to them on YOUR terms. Make sure it’s refoundable - not going hard untill you confirm all contingencies.
Conroe, TX · Member since 2016 · 237 posts · 43 votes
8y
@Hadar Orkibi It does make you wonder! From what I know I think they are trying to keep out all but the most serious of buyers, but due to the market I think they would have already had it sold by now if they were more flexible.