Creative Real Estate Financing

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Alex Hansen
  • Real Estate Consultant
  • Utah
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Use private money lender for down payment on a seller finance?

Alex Hansen
  • Real Estate Consultant
  • Utah
Posted Oct 20 2022, 19:43

So I am working with a seller that is open to seller finance, but they need 10% down payment. I am wondering how it would work if I use a private money lender for the down payment and how I would structure the seller finance deal so I can pay off. 
For context: If we do a standard 30 year amortization, monthly PITI is roughly $1800 and rent is $2400. Down payment would be $30k. All advice helps! Thank you.

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Mike Hern#1 Buying & Selling Real Estate Discussion Contributor
  • Investor
  • Scottsdale Austin Tuktoyaktuk
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Mike Hern#1 Buying & Selling Real Estate Discussion Contributor
  • Investor
  • Scottsdale Austin Tuktoyaktuk
Replied Oct 20 2022, 20:27
Quote from @Alex Hansen:

So I am working with a seller that is open to seller finance, but they need 10% down payment. I am wondering how it would work if I use a private money lender for the down payment and how I would structure the seller finance deal so I can pay off. 
For context: If we do a standard 30 year amortization, monthly PITI is roughly $1800 and rent is $2400. Down payment would be $30k. All advice helps! Thank you.

Well, now I'm a little confused. Why would you have both? "monthly PITI is roughly $1800 and rent is $2400" 


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Alex Hansen
  • Real Estate Consultant
  • Utah
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Alex Hansen
  • Real Estate Consultant
  • Utah
Replied Oct 20 2022, 20:35

Hey Mike. I'm purchasing it as a rental property. The PITI are my expenses, and the rent is income. Hope this helps. Thanks

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Eliott Elias#2 All Forums Contributor
  • Investor
  • Austin, TX
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Eliott Elias#2 All Forums Contributor
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  • Austin, TX
Replied Oct 20 2022, 20:52

The private money lender will probably want some equity in the mix. Not a second position lien 

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Alex Hansen
  • Real Estate Consultant
  • Utah
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Alex Hansen
  • Real Estate Consultant
  • Utah
Replied Oct 20 2022, 20:56

Hey Eliott, good point. How much equity would be fair for a 10% or $30k loan? Thanks

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Sean Bramble
  • Investor
  • NYC/ Oklahoma
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Sean Bramble
  • Investor
  • NYC/ Oklahoma
Replied Oct 21 2022, 05:44

anyone coming in on a second position will likely not want to take the final 10% of the deal - super risky for them if they are forced to foreclose on you. Could you instead try to get an unsecured loan for the final 10%? Or perhaps one secured by another asset you have? Could also ask the seller if you could pay them back the DP over some reasonable period of time.

If financing it with debt isn’t possible you may consider bringing in an equity capital partner and giving them a % of the deal, sharing profits, etc. 

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Dave McIntyre
  • Investor
  • Northern NJ
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Dave McIntyre
  • Investor
  • Northern NJ
Replied Dec 4 2022, 07:41

Hi Alex,

One option that can also work is to get unsecured funding. It's out there and available from lenders who don't have as strict criteria as conventional banks.

Be happy to connect.

Best,

Dave