I currently have a unit under contract that is part of a small strip in a good location. The unit has a finance company paying $1150 a month in rent and they have been there for several years. The unit is worth about 120k and I am buying it for 79k giving it a good return. I am also interested in another unit beside it with a similar scenario. I have long term financing lined up to go either way which will pay 65% of the one unit or 80% on both which leaves the down payment about the same either way. I am looking for a creative solution to not put so much out of pocket in the deal. I can likely get a hard money loan for the whole thing and then refi later which is an option but I would prefer to find a way to keep my long term financing but cover most of the DP without cash out of pocket. My lender offered a solution in which I convince the seller to let me do a contract for more than the purchase price with the agreement that he pays me the difference. This would mean I bring the money to close but he gives it right back leaving me with less in the deal but with less cash flow. I could come up with the cash myself but it would put the brakes on several things I have going on and set those things back a few months. Any thoughts on a creative DP in this case?
I get really wary of getting cash back after the deal from the seller. It echos the mortgage fraud that happened pre-2008.
To lower your down payment creatively and legally there are a few things you can do. Close early in the month (2nd-5th) you are entitled to almost a month of rent as the new buyer and it will be credited to you at closing. Then ask the seller for deferred maintenance credits. You may need your lenders blessing on this but theoretically if you negotiate cash back at closing due to deferred maintenance it will lower your out-of-pocket down payment expense. I think there are other strategies out there too but these are the only ones I've used.