Seeking Advice for Down Payment Issue on Multifamily Property

[Andrew Jones]

Hi,

I’m currently seeking gap funding options to cover the down payment for purchasing multifamily investment properties in Scott County, Iowa. Our available capital is currently tied up in ongoing projects, but we continue to identify promising deals that we would like to acquire.

If anyone has recommendations for lenders or programs that provide gap financing for down payments, I would greatly appreciate your insights. Additionally, I’m interested in lenders who allow for seller financing arrangements, specifically where the seller carries a second lien to cover the down payment portion.

Thank you in advance for any guidance or referrals.

Sincerely,

Andrew

[Don Konipol]

Quote from @Andrew Jones:

Hi,

I’m currently seeking gap funding options to cover the down payment for purchasing multifamily investment properties in Scott County, Iowa. Our available capital is currently tied up in ongoing projects, but we continue to identify promising deals that we would like to acquire.

If anyone has recommendations for lenders or programs that provide gap financing for down payments, I would greatly appreciate your insights. Additionally, I’m interested in lenders who allow for seller financing arrangements, specifically where the seller carries a second lien to cover the down payment portion.

Thank you in advance for any guidance or referrals.

Sincerely,

Andrew

 You’re unlikely to find a willing lender.  What you will find are intermediaries, brokers and middlemen asking you for a ton of documents, then stating that they could get the deal done, but you need to pay a due diligence fee upfront.  They will never deliver. 

Here’s two questions you need to answer. 1. Will the property being purchased cover the debt service of both the long term note and the gap funding loan?  Will it do so with “room to spare”?  Do you have funds in reserve  to cover periods of negative cash flow? If the answer is no there’s no need to go further.  You shouldn’t be purchasing additional property even if you could. The risk of total loss should the market turn south is too great.  
If the answers are yes, then we can go to the second question.  Is there significant equity in your current real estate portfolio?  If yes, then you can create second lien notes secured by your current portfolio properties.  Either find a seller willing to accept these notes as a down payment, or sell the notes to a note investor to raise capital for a down payment. 

In either case forget 6 or 7% interest.  You’re into the double digit + category.