Structuring an Offer using Creative Financing

12 Replies

Hello Everyone,

I have a pocket listing for a 20 unit apt complex. I have done my analysis on the property and discovered that it is a good deal. I would like to make an offer but not sure on how to do so.

I do not have 20-25% liquid to put down. I am looking for creative financing advice. Asking price is $639,900. There is debt on the property for $400k which is assumable at a 30 yr am/7.5% int. 

Any advice would be greatly appreciated.

Thanks

@Patrice Penda - Well everyone has their own criteria to determine what is a good deal for them. Based on my criteria it is a good deal. However my inquiry had nothing to do with determining whether or not it was a deal.

I appreciate the response but allow me to clarify. I am looking for advice on master lease agreements, sub 2's and owner financing. Would you happen to know how to structure those around an assumable mortgage with very little out of pocket?

@Ronl Nichols

I don't have the answer to your question. 

However, try reaching out to Joe Fairless, he is extremely knowledgeable and very active on BiggerPockets.com.

He'll be able to help you.
Good luck!

@Joe Fairless? Joe Fairless from the Best Ever podcast?

@Ronl Nichols

First off the interest rate on the assumable debt is way too high.  You can slice that down substantially with today's rates (unless your credit is in the dumps).  In regards to Seller Financing, I always ask the seller why they are selling?  I ask this important question so I can see if their situation would actually benefit from or even entertain Seller Financing.  Depending on their answer, I then figure out the best type of financing in which it is a complete win/win situation for all parties involved.  Why don't you ask them this question and let me know.  I can then give you a more detailed answer.

@Steve Kontos I agree the current interest rate at 7.5 is high. Although my credit is good, lacking the 20% down I figured I would not get approved for a new loan to replace it with. However at the current terms this property still cash flows well.

I should have more info from the seller tomorrow. Thank you Steve I will follow up!

@Steve Kontos seller wants out to buy a larger property using a 1031 exchange.  

@Ronl Nichols if the seller is looking to 1031 the proceeds for the sale into a larger property then there's really not much room for creative financing from the seller.   If this is indeed a good solid opportunity why not consider bringing in a partner that can help you with the 20%-25% you need to get into the project? 

  

@Ruben Guerrero - Thank you. As for partner/private lenders I have exhausted my options with people I know who are capable of investing without asking complete strangers.

@Ronl Nichols

@Ruben Guerrero is right on this.  A 1031 exchange doesn't leave much room for creative financing.  I would go through a hard money lender if you have absolutely no other source for funding.  

@Steve Kontos - Can you give me a general idea of the strucure/terms of a hard money loan I should be seeking?

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