Okay, so I have a perspective 6-unit property I may buy. It has been on the market for a while (9 months) and through communication with the seller he seems ready to get out and move on. The property is in fairly good repair with a new roof 5 years ago. The area is surrounded by other multi-unit rentals of equal to worse condition, so I expect competition to be stiff and may not be able to raise rents as much as I would like. The rents are currently a little below mkt for the area. I have a potential partner, but I believe he would be better suited for a different property. That said, I am still interested in the property and believe I may be able to get it with some creative financing.
He is willing to do a seller finance deal so I am hoping he will be open to another proposal. I plan to offer his ask if he would take a note for 25-30%, in hopes that I could get financed traditionally. If I am able to acquire the property this way, I plan to use the cash flow to rehab the units as they come available and make the exterior more aesthetic. I think about $35-40,000 should do if I do most of the work myself. A conservative estimate puts me at about $12,000 per yr if the seller is willing to forgo payments and just take a bubble when I refinance and take out the equity of the added value. Assuming I could borrow enough.
He is asking 450,000 for the property and I believe that after the improvements I can increase the cash flow by approximately 30-35%. I estimate the value of the property would increase to around $660,000 give or take.
All excess cash would go into mortgage payments, paying the sellers note, and or improvements to bring in more cash and increase equity.
So, I know I didn't give you too much info. But is this even doable? What considerations should I take into account? What might impede my strategy? The risks? Does anyone have experience with this? How, did it work out?
Thanks ahead of time for the feedback.
First, if you have a loan in place for the DP from the seller, you won't get the other loan. Lenders want to be number one, and this order would put them as #2.
The rest of your scenario has too many "ifs", "I thinks", "assuming I could", to be able to analyze this.
@Joe Villeneuve I forgot to mention that I would try to get the seller to take a 2nd position on the note, knowing this is the only way I would get this financed. The ifs, I thinks, and assuming I could basically reflect my my green status. This would be my first deal so I am very unsure on basically all of it. But I have heard that it has worked for people in the past.
I think it’s possible but you’re probably more likely to get it done if you put down 10-15 percent down, have the seller in second position and finance the rest. Most lenders won’t do. 100 percent financing like this
Thanks @Caleb Heimsoth . I've thought about that as well. But I was going to give this a shot before I went and found the 45k or so. Worth a chance I think. And if it doesn't work out, well, it was a good experience non the less