All Forum Posts by: Benjamin Cowles

 Seller financing? OPM?

Thanks for all the replies.  So it looks like I'm just getting a taste of the resistance I'll be facing between myself and GOOD DEALS.  So it's gonna be a tight wiggle between price and reasonable terms which with what I'm currently considering doesn't look like any room for a deal.  

Which makes me wonder if it's common to negotiate over cashflow, like 'mr. seller, I'll seriously consider whatever price and terms you have in mind so long as it allows me a certain amount of cashflow, so we can sit down and have a beer together 10 years down the road to talk business...' as a starting point.

With my zero experience I'm clueless as to what happens on the next step, in general.  Like, out of the next 100 investment properties sold in a given area, how many are sold at a price and terms that cashflows for the buyer/investor?  Who are my competition?  For duplexes would the majority be similar investors, or are there a lot of more casual investors with more cash to spend?  So it's like I'm shooting in the dark.  Kinda fun, a little.  Won't miss it though once I get some light.  

I'll be interested in any further replies but I think I'll try that starting point, especially with anyone that identifies themselves at all as an investor.  Cashflow is what it's all going to boil down to anyway right?  

 Thanks.  Another thing I'm wondering about, is when working out a deal with another investor  offering financing especially, shouldn't it be in their best to help come up with something that will ultimately work out for the buyer.. -unless of course they were expecting you to default at some point then recover the property?  

And if indeed that is the case most of the time, should the negotiations revolve in most part around buyer's ability to one, cashflow, then most importantly refinance down the road to avoid the potential to default?

 Thanks. When you say "they" are you talking about banks? Or are there particular guidelines one must legally follow when creating a loan agreement? So far all I've gathered is you can negotiate any terms you want unless you're loaning to a homeowner. 

thank you. Yeah, I used those numbers,  just didn't want make my post too long. And yes I've proposed he finance the majority. Not interested at the moment. Perhaps later...

So I've just been cramming my brain with the subject of commercial lending. I called a number for a small 3 unit commercial building. By his asking price and terms, 1/2 he'd finance and indicated room for negotiation, looks like 6% cap rate.

Then there's refinancing issue right? Don't get in if you can't get out? And in the end it all has to cash flow. 

Okay, so what's most important here? and what is least? Or are they all equally important or am I missing something entirely? It's in good condition, all units filled and on the main strip. 

I've little knowledge on this business but my imagination tells me with a little TLC and educated negotiation I could tweak up that cap a good bit. IDK. You tell me.

So obviously it needs to cash flow but by how much? Is there a % minimum you go by? Should I try to at least get a 5 year balloon and worry about refinancing later?

I'm thinking the cap rate at his initial asking price could work if he financed most of it otherwise it I had to partner up partners would need a better cap rate and change numbers accordingly. 

Realistically I'm just hoping to learn either I was missing something to complete the deal or it just wasn't possible or its my lucky day. Either way I'm looking towards my next lead. I just want to see me quicker to the draw with my knowledge in the future. 

Am I on the right page? The right book even lol? Thanks for any and all comments!

 You mean gross rents x .81 right?

hmm, good question. Wish I knew

Wait a sec, isn't a loan amortized over a huge amount of time, 100+, basically a loan amortized over a normal amount of time with interest only payments anyway? With the balloon they function the same no?

suppose a seller will finance and doesnt want to budge on price or interest, can you just increase the amortization period til the payments get low enough to cash flow?

I think Ive heard of 50 years but nothing beyond that. suppose you'd need it to be 100-300 to work. Assuming there would be a balloon payment, does it matter? Any reason why it wouldnt work or are there other strategies im missing that would normally solve this problem?

Would offering interest only payments for a period of time be a common strategy overcome this challenge? Sounds more costly over a 300 yr amortized loan but I just have never seen anything like that.