Brand new to BP and REI in general. Excited to be here :)
Looking into creative financing for apartment complexes (30+ units).
Forgive my "noob-ish" curiosity, just trying to explore possible options!
- Seller is selling 30 units for $1,500,000
- Seller is open to seller financing with 20% down payment (interest only + balloon,18-24 months)
- Hard/private money lender provides 20% down payment + funds for repairs (interest only + balloon,18-24 months)
- After a 12-18 month seasoning period, the buyer refinances with a local bank (portfolio) and repays the lender/seller
The last step is made possible because in this example scenario the property appreciated through value add/market fundamentals, the buyer accrued 12-18 months of cash flow, the NOI increased (raised rents, etc) and the expenses decreased (sub metered utilities, etc).
Am I missing something? Is a scenario like this possible or am I crazy?
I have a feeling it's the latter but it'd be nice to hear from people with expertise on the topic(s).
Thanks and look forward to hearing your thoughts!
@Alex Olmer Welcome to BP! HML will require 1st position, so seller would have to be 2nd position. It is highly unlikely the seller will finance 80% of the purchase in a 2nd position mortgage.
@Alex Olmer Typically even a HML is going to require a down payment and unlikely to finance 100% of the purchase price, especially at the $1.5M price point.
Also remember you have to front the rehab money first, make repairs, get it inspected, and then you'll be reimbursed in a draw schedule.
Hope that helps to clarify,
@Tom S. Appreciate the insight!
I'm looking into other creative finance solutions like subject-to/master lease options.
Seems like those may be a better fit for what I'm trying to do.