Updated almost 9 years ago on .
How to Analyze refinancing out of owner financing
SO, Im looking into purchasing a large 6plex through owner financing. Based on the sellers needs, I want to offer him a balloon payment in 5 years. My question is, how do I minimize the risk of not refinancing in 5 years? Is there any sound way of knowing I can refinance in 5 years and pay off the owner guaranteed? Is it just a matter of making sure I am not buying at a premium (high in the market)? Everyone says to not buy on appreciation, WELL I want this deal because it cashflows $200 a month at undervalued rents as is and with some rehab I can increase those rents and thus the cashflow, HOWEVER I do not want to have to give this property back in 5 ears if I can't refinance.
What do I do to make sure I can refinance? Make sure I have at most a 75% LTV in 5 years? Well how do I know the market is going to go up? Do I just assume that the market will always appreciate (that sounds ignorant)?Whats the answer here? Does anyone have any experiences with this kind of scenario they can share or any suggestions on how to further analyze this property?