URGENT Advice Needed - 19 Unit Property

121 Replies

Most financial institutions require that you prove the down payment is your money not borrowed, and most Hard money lenders I know want you to have some skin in the game. My personal preference is that you have some of your own money at risk, when Im doin business with you.

@Daniel Daskaloski 10 days is still 1/3 of a months rent for apartments. Also have to factor in the cost of turnover and agent fees. 6 commercial spaces are also not nearly as easy to rent as an apartment. If one or two goes vacant that can sit for years. I understand you think the seller is motivated but the deal doesn’t sound as good as you may think.

There will be peaks and valleys, so to account for that, make sure vacancy is acounted for.

The seller wants $2M ... once you have your numbers accurately figured out and if the deal makes sense, go for it and make an offer. It's great that you are looking for partners and creative financing options but you also want to get the contract signed. You mentioned the seller wants to unload the properties ASAP. Once under contract, if financing does not work out on your end, you can pull out of the deal through one of your contingency options. Best wishes and congrats on finding this pocket listing. 

Originally posted by @Daniel Daskaloski :

Also, i understand a lot of people posted about vacancy being an issue. I have multiple properties in this city. I rent them out within 10 days. The market here is extremely hot and its not going to slow down. 

This seems like a prime opportunity for a creative finance transaction. You have a certain degree of trust and rapport already built with the seller and she seems to be especially motivated since she is going through an awful period in life AND now has all this additional responsibility.

I think plenty of people have driven the point home that expenses are low. The vacancy isn't figured in, management isn't figured in and monthly maintenance of $160 is extremely low... this difference can be used to negotiate price and/or terms

Here's a quick overview of a few potential structures. (I'll be happy to go through them in more detail over the phone.)

IMPORTANT: How these ideas are introduced to the negotiation is CRITICAL. I would not discuss any of these with the seller without getting to the full game plan. My gut tells me that, if handled properly, you can get the seller to agree to one of these.

One of the most important aspects of negotiating this deal is to get the root of why EXACTLY she wants to sell in a hurry. What is her anxiety?... My gut tells me that she doesnt want to deal with the management of the property and its not really that she needs the money... that could be wrong, of course, I have limited info but... its a guess.

1) 100%+ CLTV Financing: This option would eliminate the need for you to take on a partner and may even allow for you to walk away from the closing table with some cash to put toward the property or so you can have a bit of a cushion.

How it works: Instead of going directly to a conventional loan and finding a partner to put up a lot of cash. You get a low LTV hard money loan (30% - 50%) and have the owner carry a second mortgage for the balance.

If you want to walk away with some cash just increase the amount of the second mortgage and you get the balance at the closing table.

Of course... it will depend on what the current loan balance is. This scenario works best if there is little to no current balance on the property.

Refinancing a property that you already own is infinitely easier than purchasing a property. After you own it for 6 months or a year you can refi and pay off most of what you owe her... all of it if you buy with enough equity.

The big benefit here would be that you get to keep 100% of the property without having to take on a partner.

2) Master Lease Option: This option wouldn't require any cash and it also lets you keep 100% of the property.

Very similar to a lease option on a residential home. You take on the responsibility of the property. Take away her pain, remove her headache and anxiety because you will be fully responsible for everything that happens to the property.

Let's say the NOI is 10,000 you lease the property from her for 8000 - 10000 monthly which will contractually count as a down payment. You increase the income of the property and keep the cashflow OR stabilize the property and sell it and do a double closing with Transactional Funding 

The Master Lease Option works best if there is upside on a property.

Feel free to reach out to me. I love talking shop, I'll be glad to go more in depth and give you my opinion of the best way to get her to say yes.

Originally posted by @Niranjan Patel :

@Daniel Daskaloski

this is an opportunity you do not want to miss and judging by your questions, you are not ready to tackle this on your own. Get an investor to put in the 500k @75% or whatever..

You get to have this property evaluated by investor (and also the bank since most of it is their money) and move on with the deal.

You get a mentor free and make some money with none of yours down (thats an infinite return).

Life is short - make this one happen and you will be a lot better equipped with the next one.

Dont get hung up on the splits - this is a great learning opportunity while you get paid for it!

Good luck!

 @Daniel Daskaloski If it is a friend or family member then seller financing is going to be your best way to get a deal like this based on what you are saying.  I have not made it through the entire thread yet but this is the first post that is in line with exactly what I was thinking.    It's not a knock, or a bad thing, but its very clear from your questions that an experienced partner is the only way to make this actually happen.  You mentioned you have 2-3 homes you renovate and rent out.  Is it 2, or is it 3? Either way, it's not nearly enough experience to tackle this project.   Also, you are going to need a money partner for what sounds like all of the down payment, do you have a commitment to lend from a bank?  IF the numbers shake out and this is really a deal, you will do the best by partnering with someone with the cash and the experience.   

Questions like "is this a deal" might be one of the worst questions I see on this site.  And there is such a thing a bad question contrary to some cliches.   Your number one job above all is to determine if this is a deal or not.   Or to come up with ways to make it a deal.  If you are not the one who can show why and how its a deal, this is a really good lead for someone who buys and operates multi units like this.  I am sure they will be willing to pay you a substantial finder fee.

With all this said, I wish you the best of luck and there is nothing you cannot do.  So if you want a 50/50 split then go find someone who will and negotiate.  It's not impossible. It will not be easy.  Whether or not this turns out to be a deal for you is whether you can negotiate and make one or not.  Deals don't happen.  People make them.  So you tell me, is it a deal??

Originally posted by @Daniel Daskaloski:

Also, i understand a lot of people posted about vacancy being an issue. I have multiple properties in this city. I rent them out within 10 days. The market here is extremely hot and its not going to slow down.

You said 2-3 properties. I would not consider that a large enough sample size to determine a hot market from cold one.  Nor does that mean you cannot just forget about accoutning for it in the pro forma.  The banks will. Do you have actual statistics like absorption rates, DOM, list to rent rations etc. that will support it? Also, to say "its not going to slow down" tells me everything I need to know.

      Originally posted by @Daniel Daskaloski:

      2. The property is VERY well taken care of. Everything is in tip top shape. Tenants there are all there for at            least 5 years and they havent had many problems. 


That's great to here, except the condition of the properties have no relation at all to the cost to manage them. That might mean you can set aside less for CAPEX, but it in no way makes it any easier or cheaper to manage.

At the risk of sounding like a complete ***hole, in my opinion you are not even close to being ready for a deal like this.   I think you are doing the right thing by coming here and trying to learn, and I think you have potentially a good deal on your hands, but I'm just going to say it,  you don't know what you don't know, and I can tell there are some important factors that go into a deal that you just have not learned or experienced yet. Again, I wish you the best of luck.

Updated 9 months ago

Update. A few members mentioned the 166/unit, and it appeared to be management fees. If they are maintenance fees, then yes, I can see how units in tip top shape will mean you don't need to replace things soon, but maintence is just that, maintence. Its ongoing. You maintain the major items so you do not have to replace them, hopefully. I don't want to get lost in the monthly fees, I just wanted to clarify the comment above, and BP wont let me edit.

Originally posted by @Tom Antonio :

Most financial institutions require that you prove the down payment is your money not borrowed, and most Hard money lenders I know want you to have some skin in the game. My personal preference is that you have some of your own money at risk, when Im doin business with you.

Of course, and i do have a 100K of my own that i can put into this deal. Its not much compared to the whole deal, but its definitely skin in the game for this deal. 

Originally posted by @Christopher Lombardi :

@Daniel Daskaloski 10 days is still 1/3 of a months rent for apartments. Also have to factor in the cost of turnover and agent fees. 6 commercial spaces are also not nearly as easy to rent as an apartment. If one or two goes vacant that can sit for years. I understand you think the seller is motivated but the deal doesn’t sound as good as you may think.

 Fully understand. 

The store fronts of this building, my plan at least is if they do go vacant to convert them into apartments. Easier to rent and I can get more money for them. 

Originally posted by @Melody Rault :
There will be peaks and valleys, so to account for that, make sure vacancy is acounted for.

The seller wants $2M ... once you have your numbers accurately figured out and if the deal makes sense, go for it and make an offer. It's great that you are looking for partners and creative financing options but you also want to get the contract signed. You mentioned the seller wants to unload the properties ASAP. Once under contract, if financing does not work out on your end, you can pull out of the deal through one of your contingency options. Best wishes and congrats on finding this pocket listing. 

Originally posted by @Daniel Daskaloski:

Also, i understand a lot of people posted about vacancy being an issue. I have multiple properties in this city. I rent them out within 10 days. The market here is extremely hot and its not going to slow down. 

Greatly appreciate the advice. I did re-run the #'s to account for vacancy, capEX, etc. The monthly profit comes out to almost 2k. 

As i said even if i had 0 profit and i am able to cover ALL of the expenses in the beginning, i would be happy. 

Dan

This one of the more interesting (and detailed threads w/ specific numbers ) I've read on BP lately (as opposed to "Hi! Newbie from Biloxi, MI here! How can I make $$ in RE?). 

Why are so many posts deleted  / removed by moderator?  Frustrating censorship... 

At the end of the day my advice is:  Go for it! And put skin in the game! It's the right thing to do! While you may still have much to learn, you know more than you think!  Just make sure you've deep-dived into every expense, and looked under every rock before moving forward... Never underestimate the power of  Murphy's Law with deals like this...



Originally posted by @William C. :
Originally posted by @Niranjan Patel:

@Daniel Daskaloski

this is an opportunity you do not want to miss and judging by your questions, you are not ready to tackle this on your own. Get an investor to put in the 500k @75% or whatever..

You get to have this property evaluated by investor (and also the bank since most of it is their money) and move on with the deal.

You get a mentor free and make some money with none of yours down (thats an infinite return).

Life is short - make this one happen and you will be a lot better equipped with the next one.

Dont get hung up on the splits - this is a great learning opportunity while you get paid for it!

Good luck!

 @Daniel Daskaloski If it is a friend or family member then seller financing is going to be your best way to get a deal like this based on what you are saying.  I have not made it through the entire thread yet but this is the first post that is in line with exactly what I was thinking.    It's not a knock, or a bad thing, but its very clear from your questions that an experienced partner is the only way to make this actually happen.  You mentioned you have 2-3 homes you renovate and rent out.  Is it 2, or is it 3? Either way, it's not nearly enough experience to tackle this project.   Also, you are going to need a money partner for what sounds like all of the down payment, do you have a commitment to lend from a bank?  IF the numbers shake out and this is really a deal, you will do the best by partnering with someone with the cash and the experience.   

Questions like "is this a deal" might be one of the worst questions I see on this site.  And there is such a thing a bad question contrary to some cliches.   Your number one job above all is to determine if this is a deal or not.   Or to come up with ways to make it a deal.  If you are not the one who can show why and how its a deal, this is a really good lead for someone who buys and operates multi units like this.  I am sure they will be willing to pay you a substantial finder fee.

With all this said, I wish you the best of luck and there is nothing you cannot do.  So if you want a 50/50 split then go find someone who will and negotiate.  It's not impossible. It will not be easy.  Whether or not this turns out to be a deal for you is whether you can negotiate and make one or not.  Deals don't happen.  People make them.  So you tell me, is it a deal??

Originally posted by @Daniel Daskaloski:

Also, i understand a lot of people posted about vacancy being an issue. I have multiple properties in this city. I rent them out within 10 days. The market here is extremely hot and its not going to slow down.

You said 2-3 properties. I would not consider that a large enough sample size to determine a hot market from cold one.  Nor does that mean you cannot just forget about accoutning for it in the pro forma.  The banks will. Do you have actual statistics like absorption rates, DOM, list to rent rations etc. that will support it? Also, to say "its not going to slow down" tells me everything I need to know.

      Originally posted by @Daniel Daskaloski:

      2. The property is VERY well taken care of. Everything is in tip top shape. Tenants there are all there for at            least 5 years and they havent had many problems. 


That's great to here, except the condition of the properties have no relation at all to the cost to manage them. That might mean you can set aside less for CAPEX, but it in no way makes it any easier or cheaper to manage.

At the risk of sounding like a complete ***hole, in my opinion you are not even close to being ready for a deal like this.   I think you are doing the right thing by coming here and trying to learn, and I think you have potentially a good deal on your hands, but I'm just going to say it,  you don't know what you don't know, and I can tell there are some important factors that go into a deal that you just have not learned or experienced yet. Again, I wish you the best of luck.

Thank you for your input. 

1. I dont mind getting an investor and splitting the property, but where do i find such an investor. I do have money investors, but with 0 real estate experience. I do want someone that can at least mentor me. 

2. I think i said 2-3 family properties. I own a few properties that range from 2 to 3 families :).

I do appreciate your input an honesty. But you don't get these deals often, so i'm trying to learn as quickly as possible and hopefully not miss this great opportunity. 

Originally posted by @Brooklyn R. :

Why are so many posts deleted  / removed by moderator?  Frustrating censorship... 

 My guess is people trying partner directly or offer financing for the deal.   I have had 1 post deleted in all my time on BP, they did not give me a reason but I may have eluded to "funding" a deal if the numbers were what OP was actually telling us.    I am not certain but I'm pretty sure that can't be done on the forums, unless you are in the PRO marketing forum.   

@Daniel Daskaloski This is a great thread with a lot of information.  I do not have any experience, but I did just read "ABCs of Real Estate Investing" by Ken McElroy and there was a detailed section in it that went over how to analyze a commercial property to find if it was a deal or not.  I feel that a lot of the information in that book could help you determine whether or not this is a good deal, or if there is anything you could do during negotiations to make it a better deal.  If you haven't read it, I would recommend picking it up!  I wish you the best of luck with your decisions and investments!

Originally posted by @Brooklyn R. :

This one of the more interesting (and detailed threads w/ specific numbers ) I've read on BP lately (as opposed to "Hi! Newbie from Biloxi, MI here! How can I make $$ in RE?). 

Why are so many posts deleted  / removed by moderator?  Frustrating censorship... 

At the end of the day my advice is:  Go for it! And put skin in the game! It's the right thing to do! While you may still have much to learn, you know more than you think!  Just make sure you've deep-dived into every expense, and looked under every rock before moving forward... Never underestimate the power of  Murphy's Law with deals like this...

Thanks for Chiming in. 

1. I think the mods removed a lot of posts because some of them were offers from lenders or asking for offers which is not allowed i guess. 

2. In regard to the #'s i tried to pull out as much info from the sellers as i can. 

3. I factor the issues that might come up a bit differently. My brother owns a large construction business, i have (thru him) many connections in general construction, plumbing, roofing etc. In other words, if something costs 5k to repair i can probably get it done for 2k. 

I know things can go wrong, but its like with everything else. Anything can go wrong, always but you just have to push, deal with it and move on & get it done. 

Dan

Originally posted by @Daniel Daskaloski :

Thank you for your input. 

1. I dont mind getting an investor and splitting the property, but where do i find such an investor. I do have money investors, but with 0 real estate experience. I do want someone that can at least mentor me. 

2. I think i said 2-3 family properties. I own a few properties that range from 2 to 3 families :).

I do appreciate your input an honesty. But you don't get these deals often, so i'm trying to learn as quickly as possible and hopefully not miss this great opportunity. 

 1.  Hmm.  If you have the money, and you are just looking for an experienced landlord to come along for the ride.....I can think of about 1000 people that come to mind.  I'd be happy to point you in the right direction.

2. OK i see.  You have a few duplexes and triplexes.  So it would be the 6 store fronts that make this deal out of your scope, and into the commercial side of things.  I'll say it again, if its a DEAL, you will have applications from investors to join the deal and mentor you all along the way.

When will the opportunity be lost?  Is there a hard stop date that she must sell before?  

Originally posted by @Daniel Daskaloski :


Originally posted by @William C.:
Originally posted by @Niranjan Patel:

@Daniel Daskaloski

this is an opportunity you do not want to miss and judging by your questions, you are not ready to tackle this on your own. Get an investor to put in the 500k @75% or whatever..

You get to have this property evaluated by investor (and also the bank since most of it is their money) and move on with the deal.

You get a mentor free and make some money with none of yours down (thats an infinite return).

Life is short - make this one happen and you will be a lot better equipped with the next one.

Dont get hung up on the splits - this is a great learning opportunity while you get paid for it!

Good luck!

 @Daniel Daskaloski If it is a friend or family member then seller financing is going to be your best way to get a deal like this based on what you are saying.  I have not made it through the entire thread yet but this is the first post that is in line with exactly what I was thinking.    It's not a knock, or a bad thing, but its very clear from your questions that an experienced partner is the only way to make this actually happen.  You mentioned you have 2-3 homes you renovate and rent out.  Is it 2, or is it 3? Either way, it's not nearly enough experience to tackle this project.   Also, you are going to need a money partner for what sounds like all of the down payment, do you have a commitment to lend from a bank?  IF the numbers shake out and this is really a deal, you will do the best by partnering with someone with the cash and the experience.   

Questions like "is this a deal" might be one of the worst questions I see on this site.  And there is such a thing a bad question contrary to some cliches.   Your number one job above all is to determine if this is a deal or not.   Or to come up with ways to make it a deal.  If you are not the one who can show why and how its a deal, this is a really good lead for someone who buys and operates multi units like this.  I am sure they will be willing to pay you a substantial finder fee.

With all this said, I wish you the best of luck and there is nothing you cannot do.  So if you want a 50/50 split then go find someone who will and negotiate.  It's not impossible. It will not be easy.  Whether or not this turns out to be a deal for you is whether you can negotiate and make one or not.  Deals don't happen.  People make them.  So you tell me, is it a deal??

Originally posted by @Daniel Daskaloski:

Also, i understand a lot of people posted about vacancy being an issue. I have multiple properties in this city. I rent them out within 10 days. The market here is extremely hot and its not going to slow down.

You said 2-3 properties. I would not consider that a large enough sample size to determine a hot market from cold one.  Nor does that mean you cannot just forget about accoutning for it in the pro forma.  The banks will. Do you have actual statistics like absorption rates, DOM, list to rent rations etc. that will support it? Also, to say "its not going to slow down" tells me everything I need to know.

      Originally posted by @Daniel Daskaloski:

      2. The property is VERY well taken care of. Everything is in tip top shape. Tenants there are all there for at            least 5 years and they havent had many problems. 


That's great to here, except the condition of the properties have no relation at all to the cost to manage them. That might mean you can set aside less for CAPEX, but it in no way makes it any easier or cheaper to manage.

At the risk of sounding like a complete ***hole, in my opinion you are not even close to being ready for a deal like this.   I think you are doing the right thing by coming here and trying to learn, and I think you have potentially a good deal on your hands, but I'm just going to say it,  you don't know what you don't know, and I can tell there are some important factors that go into a deal that you just have not learned or experienced yet. Again, I wish you the best of luck.

Thank you for your input. 

1. I dont mind getting an investor and splitting the property, but where do i find such an investor. I do have money investors, but with 0 real estate experience. I do want someone that can at least mentor me. 

2. I think i said 2-3 family properties. I own a few properties that range from 2 to 3 families :).

I do appreciate your input an honesty. But you don't get these deals often, so i'm trying to learn as quickly as possible and hopefully not miss this great opportunity. 

Daniel,

It sounds like this is a good deal - if it's true that you can get more income out of it.

I think there are 2 "burning questions" that you have that remain unanswered:

1. How to find experienced investors who can do the deal with you

2. How do you structure the deal

Here's the answer to #1. Focus on your local market. Attend your local real estate investors association and network. Seek out local investors by searching them here on BP. Google "we buy houses [your city]" and call every name/company that comes up. You can also talk to commercial real estate attorneys and find out who are the players in your market whom you can talk to.

Now before you call any investor, tie up the property first with a Letter of Intent that converts to a Purchase Contract once you've done your preliminary due diligence and you're able to line up the investor.

Here's the answer to #2. It depends.

If you can get some seller financing, the amount of skin in the game you have to come up and how much the investor will come up will be a lot less. As a lot of people have suggested, aim to get some owner financing. I doubt it though you can do this with no money down but you can aim for this:

- $2M purchase price
- 10% seller finance (2nd mortgage: 6% interest only, all interest accrue to be paid when the loan gets paid - balloon payment in 5 years)
- 20% downpayment
- 70% 1st mortgage (from a bank)

The downpayment ($400,000) can be split into $100K from you, $300K from an investor

The $300K can be a private loan, 8% interest, interest only, balloon payment in 5 years

and on top of that, since the investor will mentor you, he gets 50% of the profit

You are on the loan, you pay for the repairs and the closing costs and get 50% of the profit.

I think the set up above is equitable because it pays the investor enough return for risking $300K and the investor will be comfortable that you have enough skin in the game.

Makes sense?

Originally posted by @William C. :
Originally posted by @Daniel Daskaloski:

Thank you for your input. 

1. I dont mind getting an investor and splitting the property, but where do i find such an investor. I do have money investors, but with 0 real estate experience. I do want someone that can at least mentor me. 

2. I think i said 2-3 family properties. I own a few properties that range from 2 to 3 families :).

I do appreciate your input an honesty. But you don't get these deals often, so i'm trying to learn as quickly as possible and hopefully not miss this great opportunity. 

 1.  Hmm.  If you have the money, and you are just looking for an experienced landlord to come along for the ride.....I can think of about 1000 people that come to mind.  I'd be happy to point you in the right direction.

2. OK i see.  You have a few duplexes and triplexes.  So it would be the 6 store fronts that make this deal out of your scope, and into the commercial side of things.  I'll say it again, if its a DEAL, you will have applications from investors to join the deal and mentor you all along the way.

When will the opportunity be lost?  Is there a hard stop date that she must sell before?  

I have about a week. There area already 3 - 2M offers that she got. My relationship with the seller gives me the edge here. So i would like to do this as quickly as possible. 

Thanks

Dan

Originally posted by @Christina Linn :

@Daniel Daskaloski I would not move forward without a significant price drop. You should be getting more return on so many units. 1.5M might do it, but 1.25M definitely would for me. The numbers aren’t horrible, but they also aren’t good.

 There is multiple 2M offers for this property. The relationship with the seller gives me this edge. 

Thanks

Originally posted by @Michael Ealy :
Originally posted by @Daniel Daskaloski:


Originally posted by @William C.:
Originally posted by @Niranjan Patel:

@Daniel Daskaloski

this is an opportunity you do not want to miss and judging by your questions, you are not ready to tackle this on your own. Get an investor to put in the 500k @75% or whatever..

You get to have this property evaluated by investor (and also the bank since most of it is their money) and move on with the deal.

You get a mentor free and make some money with none of yours down (thats an infinite return).

Life is short - make this one happen and you will be a lot better equipped with the next one.

Dont get hung up on the splits - this is a great learning opportunity while you get paid for it!

Good luck!

 @Daniel Daskaloski If it is a friend or family member then seller financing is going to be your best way to get a deal like this based on what you are saying.  I have not made it through the entire thread yet but this is the first post that is in line with exactly what I was thinking.    It's not a knock, or a bad thing, but its very clear from your questions that an experienced partner is the only way to make this actually happen.  You mentioned you have 2-3 homes you renovate and rent out.  Is it 2, or is it 3? Either way, it's not nearly enough experience to tackle this project.   Also, you are going to need a money partner for what sounds like all of the down payment, do you have a commitment to lend from a bank?  IF the numbers shake out and this is really a deal, you will do the best by partnering with someone with the cash and the experience.   

Questions like "is this a deal" might be one of the worst questions I see on this site.  And there is such a thing a bad question contrary to some cliches.   Your number one job above all is to determine if this is a deal or not.   Or to come up with ways to make it a deal.  If you are not the one who can show why and how its a deal, this is a really good lead for someone who buys and operates multi units like this.  I am sure they will be willing to pay you a substantial finder fee.

With all this said, I wish you the best of luck and there is nothing you cannot do.  So if you want a 50/50 split then go find someone who will and negotiate.  It's not impossible. It will not be easy.  Whether or not this turns out to be a deal for you is whether you can negotiate and make one or not.  Deals don't happen.  People make them.  So you tell me, is it a deal??

Originally posted by @Daniel Daskaloski:

Also, i understand a lot of people posted about vacancy being an issue. I have multiple properties in this city. I rent them out within 10 days. The market here is extremely hot and its not going to slow down.

You said 2-3 properties. I would not consider that a large enough sample size to determine a hot market from cold one.  Nor does that mean you cannot just forget about accoutning for it in the pro forma.  The banks will. Do you have actual statistics like absorption rates, DOM, list to rent rations etc. that will support it? Also, to say "its not going to slow down" tells me everything I need to know.

      Originally posted by @Daniel Daskaloski:

      2. The property is VERY well taken care of. Everything is in tip top shape. Tenants there are all there for at            least 5 years and they havent had many problems. 


That's great to here, except the condition of the properties have no relation at all to the cost to manage them. That might mean you can set aside less for CAPEX, but it in no way makes it any easier or cheaper to manage.

At the risk of sounding like a complete ***hole, in my opinion you are not even close to being ready for a deal like this.   I think you are doing the right thing by coming here and trying to learn, and I think you have potentially a good deal on your hands, but I'm just going to say it,  you don't know what you don't know, and I can tell there are some important factors that go into a deal that you just have not learned or experienced yet. Again, I wish you the best of luck.

Thank you for your input. 

1. I dont mind getting an investor and splitting the property, but where do i find such an investor. I do have money investors, but with 0 real estate experience. I do want someone that can at least mentor me. 

2. I think i said 2-3 family properties. I own a few properties that range from 2 to 3 families :).

I do appreciate your input an honesty. But you don't get these deals often, so i'm trying to learn as quickly as possible and hopefully not miss this great opportunity. 

Daniel,

It sounds like this is a good deal - if it's true that you can get more income out of it.

I think there are 2 "burning questions" that you have that remain unanswered:

1. How to find experienced investors who can do the deal with you

2. How do you structure the deal

Here's the answer to #1. Focus on your local market. Attend your local real estate investors association and network. Seek out local investors by searching them here on BP. Google "we buy houses [your city]" and call every name/company that comes up. You can also talk to commercial real estate attorneys and find out who are the players in your market whom you can talk to.

Now before you call any investor, tie up the property first with a Letter of Intent that converts to a Purchase Contract once you've done your preliminary due diligence and you're able to line up the investor.

Here's the answer to #2. It depends.

If you can get some seller financing, the amount of skin in the game you have to come up and how much the investor will come up will be a lot less. As a lot of people have suggested, aim to get some owner financing. I doubt it though you can do this with no money down but you can aim for this:

- $2M purchase price
- 10% seller finance (2nd mortgage: 6% interest only, all interest accrue to be paid when the loan gets paid - balloon payment in 5 years)
- 20% downpayment
- 70% 1st mortgage (from a bank)

The downpayment ($400,000) can be split into $100K from you, $300K from an investor

The $300K can be a private loan, 8% interest, interest only, balloon payment in 5 years

and on top of that, since the investor will mentor you, he gets 50% of the profit

You are on the loan, you pay for the repairs and the closing costs and get 50% of the profit.

I think the set up above is equitable because it pays the investor enough return for risking $300K and the investor will be comfortable that you have enough skin in the game.

Makes sense?

 This absolutely makes sense. I appreciate it. 

As i mentioned above, there are a few people that can privately lend me the money, but 0 RE experience. I am already registered to attend a few local meetings, but i am running out of time. 

Dan

I don't have the experience of everyone else chiming in here, BUT just looking at it from a common sense approach.  You know your market better than most of us do... and if she already has those other offers, you will need to present her with an offer that is more appealing and that doesn't always mean HOW MUCH, but rather TERMS.  It seems to me that if she wants to get rid of it, she wants to get rid of the headache, so she is probably not 1031-ing it.... meaning, I would assume she will have quite the tax burden if she sells out right.... so owner/seller financing might be the key here.  If you see the value and if it works for you(the future potential seems to be something most folks are over looking with future development and in your market you understand that way more than we do) find some terms that she would prefer... agree on a price, see if she will entertain seller financing and find another way to sweeten the deal.  I'm not sure I know what that is, but the TERMS may be the key... 

@Daniel Daskaloski purchase price does not dictate assessed value. Also, other offers does not mean it will be worth it as an investment. If you aren’t profiting enough then you will be upside down on a buy and hold, which will prevent or hinder future purchases. You have to keep your debt-to-income ratio positive for every deal (60/40) or you lose buying power. That’s why I wouldn’t do it. There are plenty of investors that will buy as long as the investment pays for itself, but I never would. I’m just giving you honest advice. Good luck!

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