financing options

[Aaron Moore]

Hello everyone,

I'm hoping to buy my first property which would be a 5 unit townhouse style.

-Monthly rent income of $2,895

-No major repairs needed

-Tenant pays everything except water

-Garbage payment included in water payment

-All 5 units currently rented

-Seller asking for $119,900

I was looking to get a hard money loan but only 75% of price would be covered and I don't have a lot of money to put down for a conventional loan. If anyone has any suggestions of how I could finance this deal or advice on why I should look for a cheaper first deal would be greatly appreciated.

[Steve Vaughan]

My first, 2nd and 3rd commercial plexes (a 10 and 2 7-units) were owner-financed with 10% down at about 6%.    One of them I later re-financed with a commercial loan.

Tired, long-term landlords that owned free and clear.  They liked the monthly but not the headaches.  We did notes and deeds of trusts/mortgages - no land contracts or CFDs.

Most commercial loans are 25-30% down with 5-yr rate adjusts and calls.  They also have annual financial reporting requirements.  A lot of the underwriting decision is property-driven, but they still need a lot of skin in the DP.  A commercial loan for under $100k may be a problem for the bank.

It looks like there's room on the price of this to still cash-flow. My letter of intent (LOI) would have a ridiculously low price for cash, then more than asking for seller financing, then more than that for a master lease option. Broad stroke ideas- $x amount down at market rates... Get them what they earn monthly in your payment, headache-free. See what they say.

If they accept the low cash price, wholesale it and build capital for your next deal.

Save and save.  Scorched earth budget.  Remember this feeling the next time you want to buy a car or clothes or coffee...

Good luck @Aaron Moore!