Need some creative financing minds on a good deal I’ve got

Creative Real Estate Financing
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Need some creative financing minds on a good deal I’ve got

Jacob Dancy
Member since 2022 · 2 posts · 0 votes

I’ve got a 5 unit apartment that I’m working on purchasing direct from seller. The seller is an old timer and does not have rent rolls or written lease agreements but has had rents low for 30 years. He wants $250,000 and it rents for $2500/month. I know the area and own other properties close by and have even spoken with a couple of his renters.  

My dilemma- I’ve been in the real estate game for 2 years full time and haven’t filed my second tax return for self employment. That is going to take time as I have a fix n flip, rental and real estate sales business. I am trying to get him to owner finance with a decent chunk down so I can stabilize rent rolls for about 6-12 months and brrr out of it. 

My questions are- if he will owner finance (doubtful). How long of rent rolls will I need to refi and what will be the like LTV?

Also, if he won’t owner finance for a short period… how the heck do I buy this thing before he decides to move on to another buyer?


thanks!



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John Warren
Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
4y

@Jacob Dancy the good news is that you are dealing with commercial financing and not residential. I have done many apartment deals here in Chicago where I live, and local bank I work with is much more focused on the deal and not as much on whether you are two months shy of 2 years of self employment. 

I would call 5 local banks and credit unions and run this scenario by them. Put together a little bio/resume explaining your goal of buying this building. Give them your track record and show them you have funds. Most of the time, you will find one that wants to do the deal and build the relationship (you probably need to open an operating account at the bank and keep your reserves there). 

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  • John Warren
    Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
    4y

    @Jacob Dancy the good news is that you are dealing with commercial financing and not residential. I have done many apartment deals here in Chicago where I live, and local bank I work with is much more focused on the deal and not as much on whether you are two months shy of 2 years of self employment. 

    I would call 5 local banks and credit unions and run this scenario by them. Put together a little bio/resume explaining your goal of buying this building. Give them your track record and show them you have funds. Most of the time, you will find one that wants to do the deal and build the relationship (you probably need to open an operating account at the bank and keep your reserves there). 

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  • Scott WolfPro Member
    Lender · Boca Raton, FL · Member since 2014 · 1k+ posts · 957 votes
    4y

    @Jacob Dancy you could also explore private lenders.  

    If you're running as many RE related businesses as you mentioned, surely some of your contacts might be interested in giving you a short term loan on the property.

    2Reply
  • Eudith VacioPro Member
    Real Estate Agent · Chicago & NWI · Member since 2015 · 860 posts · 521 votes
    4y

    Hi @Jacob Dancy - sounds like a potentially good deal and surely as everyone has mentioned there has to be a way to get a loan on the property. Have you had the conversation with the seller to figure out what his timeframe is to sell? Maybe you can get him in a purchase agreement just to lock him in with an extended close date until you figure out the financing with other lenders? 

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  • Kalonji Mitchell
    Investor · Chicago, IL · Member since 2008 · 80 posts · 24 votes
    4y

    @Jacob Dancy This deal looks doable from a private lender's perspective especially if you have a decent down payment. Most can close quickly, as well. The rate may have an on your ability to cash flow. However, you are willing to take that temporary hit in order to acquire the deal, I'd suggest it. 

    @John Warren I had to thank you for this suggestion. I'm getting into the multifamily/portfolio space using my private money contact. However, I wanted a viable take-out loan option. I appreciate you sharing. 

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  • Crystal SmithPro Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
    4y
    Quote from @Jacob Dancy:

    I’ve got a 5 unit apartment that I’m working on purchasing direct from seller. The seller is an old timer and does not have rent rolls or written lease agreements but has had rents low for 30 years. He wants $250,000 and it rents for $2500/month. I know the area and own other properties close by and have even spoken with a couple of his renters.  

    My dilemma- I’ve been in the real estate game for 2 years full time and haven’t filed my second tax return for self employment. That is going to take time as I have a fix n flip, rental and real estate sales business. I am trying to get him to owner finance with a decent chunk down so I can stabilize rent rolls for about 6-12 months and brrr out of it. 

    My questions are- if he will owner finance (doubtful). How long of rent rolls will I need to refi and what will be the like LTV?

    Also, if he won’t owner finance for a short period… how the heck do I buy this thing before he decides to move on to another buyer?


    thanks!




    Our experience with small multi's in this scenario (small being 4 units or less) is we had to hold them for at least 6 months (seasoning) before refinancing.  With multi5+ there wasn't necessarily a seasoning requirement.  The lender would evaluate the risk based on the net cash flow from the building.  My recommendations- Get on the phone with banks, private lenders,..... run the deal by them and nail down an answer. Regarding LTV- 65 to 70%

    If he won't owner finance for a short period then get a "bridge or gap Loan" from friends, family, private investors.... You'll have to negotiate some great terms for someone to give you $, but if the deal is worth it then.....  You'll have to make some commitments to protect their investments


    312-681-7487
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  • Jacob Dancy
    OP
    Member since 2022 · 2 posts · 0 votes
    4y

    Thank you all for the help. I’m speaking with local banks at the moment and creating relationships. 

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  • John Warren
    Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
    4y

    @Kalonji Mitchell no problem at all. Finding the good commercial lenders is honestly relatively simple and once you call a bunch of banks you will immediately know who you want to work with based on the relationship side of things. 

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