BPrs that bought using owners 20% for down payment

6 Replies

Looking for info from BPrs that bought apartment building using owner financing 20%

Looking for the proper way to write offer asking owners to finance the 20% needed to buy apartment building.

Offer 1.3m, would like owner to finance 300k, ( Actually 23%) at 8% interest only for 5 year balloon.

I Have never asked or done a deal this way, want to make sure I get it right the 1st time

Any suggestions or help of any kind would be greatly helpful.

Thanks

Mike 

The bank providing the 1st note likely will not allow you to attach the 300k to the property in the form of a 2nd. I have done deals were you attach that note to other properties, but of course you need to own other properties to do that.

Like James Wise said, you may need collateral to satisfy an investor. If you don't have collateral, you might consider selling equity in the deal rather than asking for a loan.
Originally posted by @James Wise :

The bank providing the 1st note likely will not allow you to attach the 300k to the property in the form of a 2nd. I have done deals were you attach that note to other properties, but of course you need to own other properties to do that.

 James;

I have properties and they all have equity, I went and sat down with the bank they looked at the deal and said properties and they are uncomfortable bring said properties to 80% LTV, and still would be short of needed 20%.

This way I would like to ask the owners to carry back 20% needed for 5 years interest only.

If banks generally don't like to do these types of loans then what am I missing in the conversations and posting I have read of theses type of financing working. 

Mike

Originally posted by @Jonathan Towell :
Like James Wise said, you may need collateral to satisfy an investor. If you don't have collateral, you might consider selling equity in the deal rather than asking for a loan.

 Jonathan;

Please give me more details as to what you mean by "Selling equity in the deal"

Thanks

Mike

Originally posted by @Mike Campbell :
Originally posted by @James Wise:

The bank providing the 1st note likely will not allow you to attach the 300k to the property in the form of a 2nd. I have done deals were you attach that note to other properties, but of course you need to own other properties to do that.

 James;

I have properties and they all have equity, I went and sat down with the bank they looked at the deal and said properties and they are uncomfortable bring said properties to 80% LTV, and still would be short of needed 20%.

This way I would like to ask the owners to carry back 20% needed for 5 years interest only.

If banks generally don't like to do these types of loans then what am I missing in the conversations and posting I have read of theses type of financing working

Do you have any properties that are free and clear? If so approach the seller with the idea of using those to secure his 300k note.

Originally posted by @Mike Campbell :
Originally posted by @Jonathan Towell:
Like James Wise said, you may need collateral to satisfy an investor. If you don't have collateral, you might consider selling equity in the deal rather than asking for a loan.

 Jonathan;

Please give me more details as to what you mean by "Selling equity in the deal"

Thanks

Mike

 You could find an investor and instead of getting a loan, sell some portion of a company to the investor, say 20%. Use the money to satisfy the banks down payment requirement.

Selling equity can be good because the new partner only gets paid out of profit, unlike a loan which must be serviced regardless of profit. However, equity is more costly than debt because your partner is now entitled to a portion of all profits, including cash flow and proceeds from sale of the property.

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