Foreclosing on a Seller Finance Property

[Alex Ng]

I'm about to purchase 10 units seller finance. It is my first my multifam. I'm doing DD and figuring ways to mitigate risk. The numbers seem pretty fair.. 40k down, 900k asset, all rented out, 7.5k GR with room to increase, 5.7k PITI, no balloon payment.

I plan to wrap it as an exit strategy,  but assuming worst case scenario, If I were unable to make payments and foreclose, the seller takes the property but would my credit or record be okay? Is there a way I can structure the deal where even if I am unable to make payments, nothing would happen to my credit/record? I’m looking to break even after ~2 years. Afterwards, is there essentially no risk? I won’t lose any money or no recourse for defaulting? 

What other DD would you recommend I do? I plan to verify lease agreements with the tenants via estoppel, inspection the condition of the property, verify rent payments have been consistent. 

[Chris Seveney]

Quote from @Alex Ng:

I'm about to purchase 10 units seller finance. It is my first my multifam. I'm doing DD and figuring ways to mitigate risk. The numbers seem pretty fair.. 40k down, 900k asset, all rented out, 7.5k GR with room to increase, 5.7k PITI, no balloon payment.

I plan to wrap it as an exit strategy,  but assuming worst case scenario, If I were unable to make payments and foreclose, the seller takes the property but would my credit or record be okay? Is there a way I can structure the deal where even if I am unable to make payments, nothing would happen to my credit/record? I’m looking to break even after ~2 years. Afterwards, is there essentially no risk? I won’t lose any money or no recourse for defaulting? 

What other DD would you recommend I do? I plan to verify lease agreements with the tenants via estoppel, inspection the condition of the property, verify rent payments have been consistent. 

 If you are getting a loan no there is no way to protect yourself from crushing your credit or having a foreclosure against you if you are the borrower. 

There is a ton of DD to do on a MF property, are you doing an environmental study, a reserve study, analyzing the T-12, market study to show there is room to increase rents (of course every seller states rents are underpriced)... 

MF is very different than SFR.