Creative Financing For 6 Unit - Taos, NM

7 Replies

Hello,

My wife and I are under contract on a 6-unit property in Taos, New Mexico. The property is a former bed amd breakfast recently converted to long term rentals. We are weeks away from our closing date and the lender has let us know they are unwilling to lend to us based on the fact that 2 of the units do not have kitchens. The sellers are unwilling to work with us on getting kitchens installed. We have contacted several other lenders, all with the sane response. The property is awesome, will cash flow well and has a ton of potential upside. We hate to let it go but seem to be running out of options.

Has anyone run into a similar situation and come to a creative solution? Other suggestions are welcome!

Thank you!!!

Hey @Robert Walters , have you approached the sellers about financing the sale, at least long enough for you to resolve the kitchen issue?

If they'd be willing to accept a reasonable down payment and receive payments for at least a year, would that be enough time for you to secure lender financing to cash them off?

There's ZERO downside in asking; there's likely to be some deal configuration that would make both parties happy!

Hi @Robert Walters ,

Okay, I'm not going to beat you up to hard as it's clear losing this deal would be fairly sucky and I'm sure that is already beating you up somewhat, but just to be 100% sure this base gets covered: this should have all been figured out BEFORE going under contract.  Real estate is reputation based, and Buyers who fail to close because they can't get financed soon develop a poor reputation among agents.  I'm actually kind of suprised your agent didn't do a better job ensuring your offer was on more solid ground before submitting the offer: real estate is flying off the shelf these days.  He who is not prepared loses the deal.

Anyway, enough about that.

What was / is your competition on this deal?  Were there other offers?  Did you have to bid and offer "highest and best?"  The reason I ask is we need to get inside the Seller's head and figure out what their options are if you fail to close.  Are they motivated Sellers?  If so, could you get more time in exchange for them not having to risk going out of contract?  That's a negative for them as well.  Buyers often looks at properties that have fallen out of contract and assume at least one of the following:

1) The Seller is now more desperate to Sell and will give more concessions on price, terms, etc.

2) There is something wrong with the property that caused the Buyer or the Buyer's lender not to want to deal with the property.  That's true in your case.

Anyway, I would try to "buy" some time. Ask for an extension, and if they won't do it, maybe offer more earnest money.  Show them you are EARNESTLY trying to close the sale.  Btw, still make it refundable if the financing doesn't happen.  But now it's your job to make the financing happen.

Option 1: Try hard money.  That is usually a quick, somewhat expensive solution to get control of the property so you can do your renovations done, then get traditional bank financing with all units having kitchens.

Option 2: Equity partners.  Find 3-4 people who have money sitting in a bank CD somewhere who will go in this as silent partners.  They provide money in return for a % of the profit.  You can make this short or long term.  Include an option to buy out there shares of the deal in the future at a predetermined price or at current appraised market value.

Good luck, I hope it can be salvaged.