Vender Take Back Mtg.

[RobertDiMatteo]

We are looking at buying an investment property where the Seller will take back a mortgage for 2 years.
At the end of the 2 years we essentially have to pay the Seller back and look for alternative financing.
Does anyone know the common or most practical ways to come up with funds to cover the costs associated with paying back the Seller after the 2 years?
This is a larger apartment building selling for about $1.8 million with a $200,000.00 VTB at 5%.
I`m thinking that we get the building appraised leading up to the 2 year term and borrow against the appreciated value. Obviouslly our intention is to increase rents and lower expenses and also to enhance the building so that we have the property apprecaite at approx. 4-5% per year. This would add about $150,000.00 to the value in 2 years and combined with the mortgage paydown amount of approximattly $25,000.00 per year we have a minimum of $200,000.00 recaptured over the first 2 years. I`m hoping that we could borrow against that at a preferred rate and look forward to the next 3-5 years of this investment in one of the top 10 Ontario towns.
Any suggestions or feedback would be appreciated.
Robert

 

[JoeAccardi]

Hello Robert,

Your plan would be ideal and it is how I have structured deals in the past.

You have a few options other than your plan.

1. Refinance another property in your portfolio before the two year term.
2. get a private second mortgage.
3. get a second mortgage from a bank or CMHC.
4. get jv partners or shareholders after the turnaround is complete.
5. ask the seller if he would like to extend the term.

Hope this helps.