Why would an investor choose this financing?

[Chris Clothier]

I'm looking for feedback from other active investors who want to use leverage to buy real estate, but do not qualify for conventional financing. Recently, I have been bombarded with opportunities to buy properties with private financing in place. I would never purchase under these particular parameters and want opinions of other investors who may think I am missing the good points to a deal like this. Here are the details:

Multiple properties available priced between $50k and $75k. (most are below today's market value by 10-15%.)

- 50% down payment
- 7% INTEREST ONLY
- 5 year balloon payment
- 3% loan fee plus closing costs
- taxes & insurance are not escrowed

Rent ratios run 1.2% - 1.4%

I am not a fan of the 7% interest only portion of the deal and at these costs, I believe I could actually purchase the property outright, earn the return over 5 years and be in a position to purchase another with cash. Does it make sense to put 50% down on a property and borrower at interest only with a 5 year balloon?

[Joel Owens]

Sounds like crap to me. Looks like someone thought of WHAT THEY wanted buyers to buy instead WHAT BUYERS are willing to purchase.

They will be out of business soon trying to sell that.

I can see some people with cash but bad credit paying 20 to 30% down because banks won't touch them but 50% is crazy.