So I have the opportunity to purchase a block of six townhomes, less than 15 years old in a good area. I am sure that we could get conventional financing for 75% of the purchase price, but we don't have enough for a 25% down payment.
I don't think that the seller would consider any type of seller financing, since he is elderly and has started to sell off his portfolio.
Plus, if I finance the entire amount, it will not cash flow. While I may be able to raise the rents a little, there is nothing else that I can do to add value.
Seller is asking $650K for the block of six townhomes, but it really needs to be priced at $500K to meet the 1% rule.
These are unchartered waters for me. Any ideas or suggestions that I am not considering here?
Have you asked the Vendor about carrying back 10%? A commercial lender should allow it, leaving you with only 15% to put down.
Our experience has been that the "elderly landlords" tend to be more willing to to a vendor carry (partial or full).
Can you please explain a vendor carry back? I am not familiar with it. Thanks!!!
A vendor carry is simply vendor financing - when the vender carries a mortgage (1st or 2nd) for part of the purchase price of the property. In commercial residential properties, conventional lenders will often allow the vendor to carry part of the financing over and above the LTV they will fund. Around here, the primary lender would take a mortgage for 75% LTV and would allow the vendor to carry up to an additional 10%. Leaving the buyer with a down payment of 15%.
@Beth L. Have you considered a partner?
Sorry, maybe a Canadianism - ou l'inflluence français - seller & vendor are used interchangeably.
@Beth L. -From what I understand, seller carryback is just a loan for part of the down payment. So say you need 25% down -the seller would loan you the 10% and you would only need to come up with the 15%.
Some one please correct me if I'm wrong.
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing