Lunch Break Post (Seller Finance Deal Problems)

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Lunch Break Post (Seller Finance Deal Problems)

Aaron Bard
Investor · Bangor, ME · Member since 2023 · 71 posts · 59 votes

Hello!

So recently I came across an off-market deal in my area. I called the number on the sharpie marker sign and a few days later I met up with the owners and walked the property.

it's a well maintained (on the outside) duplex on a large double-lot with tons of parking. And this property has SERIOUS value-add potential. I mean crazy!

For example:

• 2 blocks down from the second largest hospital in the area so perfect for traveling nurses.

• Needs lots of new paint, floors, wallboard, plaster repair, fixtures, and updated appliances.

3. Has the potential to add a 3rd efficiency unit with a 90% finished 3rd floor.

etc. etc.

Here's the problem...

The sellers of the property offered it to me for $200k if I could get financing. I explained seller financing and they were opposed to it because of their age, which is understandable. So my counter-offer was that I would pay them a small down payment, and have a contract saying that I must pay them in full within 18 months. I figured that I would be able to get the necessary reno done and refinance to pay them off.

But they don't like anything I throw at them.

I think that this is a huge opportunity and I don't want to miss it...but when do I know that I should walk away?

Any input or advice I'd appreciated.

Thanks BP fam!

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  • Alexis Datta
    Lender · New York, NY · Member since 2024 · 2 posts · 3 votes
    2y

    Hey Aaron - sounds like the sellers (likely due to age and lack of familiarity with owner financing) are probably not going to bend on the financing piece of this. There are quite a few other options that you should consider before walking away, though.

    It sounds like maybe a fix-and-flip loan would be a viable option for you. How many renovations have you done and how long ago were they? How long do you expect to do the reno / how much do you expect it to cost? What is your final plan for the property (rent the units / sell)? How much do you have available to put down?

    1Reply
  • Aaron Bard
    OP
    Investor · Bangor, ME · Member since 2023 · 71 posts · 59 votes
    2y
    Quote from @Alexis Datta:

    Hey Aaron - sounds like the sellers (likely due to age and lack of familiarity with owner financing) are probably not going to bend on the financing piece of this. There are quite a few other options that you should consider before walking away, though.

    It sounds like maybe a fix-and-flip loan would be a viable option for you. How many renovations have you done and how long ago were they? How long do you expect to do the reno / how much do you expect it to cost? What is your final plan for the property (rent the units / sell)? How much do you have available to put down?


     Thanks for the reply!

    I have been trying to talk to the sellers about the benefits of it for both of us but between work and ignored text messages it's kind of a struggle.

    To answer your questions:

    • I have done two light renovations on the apartments in the 3-unit that I own.

    • I'm expecting that renovation would take less than 12 months (and that's with me working a full-time job on top of it).

    • I estimated that the repair costs would be close to $10k.

     • My final plan is to rent the units as long and medium term rentals after refinancing and buying out the seller.

    • I do not currently have enough liquid capital on hand to put down 20% for a DSCR type loan. I also don't know any private investors, although that is something that I should look into.

    Thanks again for the reply! Let me know how this stuff looks :)

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  • Alexis Datta
    Lender · New York, NY · Member since 2024 · 2 posts · 3 votes
    2y

    Hey Aaron - thanks for the info! Definitely understand the frustration of your seller financing issue. I think these details definitely cement the viability of a fix-and-flip product - given your history / plan for the project, it could look like a 10% down situation if that's reasonable for you financially.

    Once you complete the property, you could then do a DSCR to pay off the initial fix-and-flip as then you will have the rental income to show for it. When you get a chance, send me an e-mail (it's in my bio) - let's connect and talk details to see if we can come up with something that works for you.

    2Reply
  • Aaron Bard
    OP
    Investor · Bangor, ME · Member since 2023 · 71 posts · 59 votes
    2y

    FUNDING UPDATE:

    Hi everyone, thanks for keeping up with me and my undying drive to acquire this property.

    I spoke with my lender and the idea came up of pulling a HELOC on my 3-Unit house hack (which I bought some significant equity in) and using that line of credit for the down payment of a DSCR loan.

    However, she did warn me that both HELOC and DSCR rates are insanely high at the moment, but she said that it's a possibility if I can make the payments.

    The plan is that I would refinance after the property rehab to pay off the HELOC and the rehab costs, then probably just keep it as a DSCR loan or refi into a 20% down conventional. I'm not really sure about that part yet.

    Moving forward, I have a lot of things to think about and any little shred of advice or insight is beyond helpful, so feel free to reach out and chat here or via Instagram or email.

    Thanks BP Fam!

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