Seller/Owner financing 20 units and up.

8 Replies

Hi. I am relatively new at this. Have done a few real estate transactions successfully before, but not in the US. The US is a really interesting market and I want to start investing in multifamily/apartment buildings and commercial real estate - especially real estate connected to the relentless growth of ecommerce. But my questions are simple. I want to grow and scale quickly. Strategy is to approach «mom & pop» sellers of multifamily, distressed properties with some sort of a problem, 10-25 % seller financing, rest bank loan, reposition the property after problem solved,refinance well, manage well and repeat process. Is seller still doable? I feel that it is. Which banks in Ohio, or nationwide allows for seller financing of the downpayment? What channels are most efficient for getting a decent deal-flow on these deals? Brokers, banks, online sites, etc? Mentors: Anybody that has done this successfully for at least 4-500 units in total, I am all ears. And willing to pay for your time. Because I know what it is worth. Kind regards, Stian Birkeland E-commerce Entrepreneur London, UK

Hi @Stian Birkeland and welcome to BiggerPockets! We've employed a similar strategy here in Atlanta over the last 20 years (albeit with SFHs), so we should definitely compare notes. Also, in addition to Ohio, I'd suggest you consider a few other high-growth Midwest states like Michigan and Missouri.

We've also had great success helping overseas investors build U.S. real estate portfolios.

Connect with me here on BP if you'd like to discuss.

@Mitch Messer Michigan, Missouri, Texas and all other high growth states are of course of interest. As long as the numbers are based on the statistical facts and reports (employment, etc). Diversifying into several geographical locations makes sense to me. Looking to learn how the game is played in the US. Buy right, finance right, manage right. Want to learn how to set up my investment crew and looking to invest for the very long term. 20 years plus.
@Brandon Sturgill So, as far as I have understood it there are banks that allow for seller financing to finance the downpayment part of the financing. Some smaller deals may even be financed with seller finance only or by assuming the existing loan on the property due to a number of circumstances. (Like the property has to few tenants for a bank to give you a loan on the property or the seller is motivated to sell and will be willing to let you assume the loan (depending approval from the bank of course.) But distressed/mismanaged properties from mom & pop sellers is the general idea. 10-25 % financed by me, my investment crew, seller. The rest via traditional lenders.
@Brandon Sturgill this kind of thing can definitely be done with commercial financing. I've bought 5 properties that way. You have to find the right lender. The ones I've done it with already knew and trusted me from other deals. Plus you need the right seller that doesn't mind holding a note for awhile. Finally, you need the right property because a) most won't cash flow very well with high leverage and b) it has to be something you see that others don't or you'll lose the deal to someone who offers the full down payment. One last consideration. Of the five I've done, I have paid off three, one matures next year And I'm actively trying to pay off the last one. Why? Because they're a pain in the ***. You're paying a lender who has never lent money before and they can be high maintenance. Also, when you pay them off, you have to be very careful they release the lien properly or you have a cloud in your title. If they die, disappear or go to prison it can make it hard to sell or refi the property. To summarize, I think it's a strategy that can work in some circumstances but it's mostly better to avoid it.
@Stian Birkeland see my other post for a description of my experience using this technique. But a couple things I wanted to add to you directly. If you already have investors why worry about this approach? Essentially what this technique does is keep the seller as one of your investors. Granted they're a 2nd position debt investor. But they're still an investor in your deal. In the right short-term situation where you can buy them out quickly by refiing the property as you suggest I think it works well but those deals are very hard to find for people with deep experience and connections in that local market so for someone with no experience and no local knowledge it's going to be nearly impossible. Unless you find a good local partner or the market gets bad again.