Funding an 8-plex deal with low money

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Funding an 8-plex deal with low money

Nathan Roberts
DES MOINES, WA · Member since 2017 · 12 posts · 1 vote

I have a question and am looking for advice on a deal that has come my way.

I am a relatively new flipper, flipped a couple of deals and am really enthusiastic about getting into real estate. I want to explore the possibility of purchasing rentals for cash flow income. I found an 8-plex in our area, the seller wants 850k and it looks like a great deal. 8% cap rate and around 500 cash flow per door, but almost all of my money is tied up in my current flipping deals right now and so I'm looking for creative ways to come up with the cash needed to fund a loan like this. I have excellent credit and a good relationship with a local wholesaler firm who has helped me find and fund my flipping deals. But this deal is off market and my wholeselling relationship doesn't deal with commercial loans.

I looked into Patch of Land, and they are willing to fund a loan that covers 2/3's of the deal but is interest only for 1 year. Should I take that deal with the idea of refinancing in 1 year? Or is there a better way to go about this deal?

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Anthony Dooley
Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes
8y

@Nathan Roberts Keep in mind that you are buying in Seattle at the most expensive time in human history. Do not assume that the market will continue to do what it has been doing for the last few years. I hope you make millions. Good luck.

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  • Shaun C.
    Royal Oak, MI · Member since 2015 · 257 posts · 230 votes
    8y

    Most people don't just jump into an 8 unit for this very same reason. You need to have 20-30% liquid for a down payment unless you can convince your seller to carry the note until you have enough cash from your flipping activities to put down for a commercial loan. If you had multiple other properties, hopefully with enough equity, you could just do a portfolio loan and have the cash. Also, I would be very apprehensive about just jumping into an 8 unit. Are you sure you don't want to start out small so you can learn the ins and outs before taking on something this big?

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  • Anthony Dooley
    Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes
    8y

    @Nathan Roberts Put the 8 unit under contract with a closing date that is 60 -90 days out. This should give you time to get some money out of the flips and secure financing through a local lender. Patch of land? Forget it. If it doesn't produce income, you don't need it at this point in your career.

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  • Nathan Roberts
    OP
    DES MOINES, WA · Member since 2017 · 12 posts · 1 vote
    8y

    Shaun, that is a good question. I am in mutual acceptance right now. I am looking at all posibilities. I have never been afread to try. most flippers dont start with 5 deals in their first 4 months. I just bought my first duplex last week. I used to have a rental house so Im not completly ignorant. I'm just looking for advice on this deal. It seems to me that the bigger the property, if you get it for the right price, the better the cashflow and so the better the deal. but thats why I am here,to learn.

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  • Nathan Roberts
    OP
    DES MOINES, WA · Member since 2017 · 12 posts · 1 vote
    8y

    @Anthony Dooley I do have it under contract sence yesterday. we are doing our do diligence now. I have 60 days financing contingency so I'm safe. the complex should cash flow from $2,500 to $4,000 a month. I would like to own 10 to 20 rentals within 2 years. I know that seems agressive but with the market here in Seattle its the best way to make real money.

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  • Ania Knapinska
    Rental Property Investor · Port Saint Lucie, FL · Member since 2015 · 16 posts · 3 votes
    8y

    Hi Nathan,

    I have been working with Patch of Land over the last year and have had excellent experience with them.  They are very professional and willing to work with you on structuring a creative deal. In addition, they offer competitive rates compared with my local hard money lenders.  We currently have two flips with them.  With that being said, you would have to be sure that you can reposition the 8plex within a year and can afford the interest before refinancing the property.  I believe the one year period can be extended to 18 months if you needed it, but you would have to speak to Patch of Land directly about that.  My contact person there is Tameer Orevi and I am sure you can ask to speak with about this deal.

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  • Anthony Dooley
    Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes
    8y

    @Nathan Roberts Keep in mind that you are buying in Seattle at the most expensive time in human history. Do not assume that the market will continue to do what it has been doing for the last few years. I hope you make millions. Good luck.

    3Reply
  • Nghi Le
    Investor / Lender · Seattle, WA · Member since 2014 · 1k+ posts · 730 votes
    8y

    @Nathan Roberts

    Feel free to PM me.  I'm in Seattle as well and I've borrowed from 15 different HMLs, including POL (although they made me put 33% down on a deal in Indiana).  I know a lender who can fund this with 10% down.  Also interested in your wholesale deal :-)

    The other posters aren't wrong though; usually when you get to 5+ units, it has stricter requirements, requires 20-30% down, and lenders want to see prior experience.  Seattle is just a unique market with HMLs that have a lot of flexibility.  HMLs here can do things like cross-collateralize down payment for 100% financing, finance mobile homes, fund at the foreclosure auctions, etc.

    Also be wary of going too fast... I purchased 9 deals within the first 6 months of when I started, and it took me two years to recover from that.

    3Reply
  • Nathan Roberts
    OP
    DES MOINES, WA · Member since 2017 · 12 posts · 1 vote
    8y

    Nghi Le,

    sorry, I'm new at BP and not sure how to PM you.

    1Reply
  • Linda Moore
    Member since 2018 · 46 posts · 21 votes
    8y

    $500 per door on a 8 er in Seattle @ $850k.  I want in.

    0Reply
  • Stu Basham
    Jersey City, NJ · Member since 2012 · 93 posts · 32 votes
    8y

    @Nathan Roberts good luck on the deal. You can PM (Private Message) someone from their profile page. Click send message or click connect or something and you can write them a message.

    When replying to someone type @ then start to type their name. Then people will appear and select the person you want to reply to.

    I'm following this discussion. Best of luck!

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