seller financing

infinity

Inspired Forum Member
REIN Member
Hello all,

I have someone who`s willing to sell me a 4plex. I would like to make it win win, as the title is free and clear, and owner willing to finance. Below are the particulars regarding the property.

ask price: 650,000
owner finance
cashflow is not a problem

What are some possible offers out there that would make this work?

thanks in advance.
 

RedlineBrett

Senior Forum Member
REIN Member
QUOTE (infinity @ May 16 2010, 11:26 PM) Hello all,

I have someone who`s willing to sell me a 4plex. I would like to make it win win, as the title is free and clear, and owner willing to finance. Below are the particulars regarding the property.

ask price: 650,000
owner finance
cashflow is not a problem

What are some possible offers out there that would make this work?

thanks in advance.

This is a dream scenario most REIN members will never come across... So good work on finding the deal!

Cash flow is not a problem for the seller because he has no debt to service on the property... But it should be front and center for you! Ugly seller financing can kill cash flow pretty quickly.

In order to make something work you are going to have to give the seller something he is not getting now. Since you are dealing with an investor that has obviously made some good moves I wouldn`t go too far until you get a better sense of why this person is looking to deal with you. Some questions.

1. Is the property worth 650k.
2. Does the owner manage it himself
3. What are the terms of the financing he is offering you? What rate, how long, what amortization.
4. How much cash does he expect you to bring to the deal.

With answers to those questions you will start to see your deal take shape. Your seller probably has a certain deal type in mind so don`t re-invent the wheel until you get their thoughts. I would start with a simple "How would you like this to work" and see what comes of it.
 

GaryMcGowan

Inspired Forum Member
Registered
Good comments by Brett, at the end of the day. Why does the seller want to sell? Can you make it work for you? As Brett said find out what the seller already has in mind. Then you can start to create a deal where both of you are happy.
 

infinity

Inspired Forum Member
REIN Member
QUOTE (RedlineBrett @ May 17 2010, 09:13 AM) This is a dream scenario most REIN members will never come across... So good work on finding the deal!

Cash flow is not a problem for the seller because he has no debt to service on the property... But it should be front and center for you! Ugly seller financing can kill cash flow pretty quickly.

In order to make something work you are going to have to give the seller something he is not getting now. Since you are dealing with an investor that has obviously made some good moves I wouldn`t go too far until you get a better sense of why this person is looking to deal with you. Some questions.

1. Is the property worth 650k.
2. Does the owner manage it himself
3. What are the terms of the financing he is offering you? What rate, how long, what amortization.
4. How much cash does he expect you to bring to the deal.

With answers to those questions you will start to see your deal take shape. Your seller probably has a certain deal type in mind so don`t re-invent the wheel until you get their thoughts. I would start with a simple "How would you like this to work" and see what comes of it.

Thanks Brett.
Dream deal this certainly is. He is a very successful businessman, and is willing to `mentor` me along the way to reach my goals.
I asked him what he was looking for, and he said `bring me something`. I was thinking of offering the following.

agree to the asking price
give 10% down, and monthly payments at 5%, 35 year ammortization.

appraisal is actually 650k.
property is self managed.
I will still cashflow very well at these numbers

What I am not sure of is, how to do I exit this after 3 years so it makes sense for both of us?

I will be doing JV`s as well down the road, and he is willing to put up as much money as necessary if the deals make sense.

He doesn`t need to sell the property, he just wants to get out of residential, and stick to commercial.

Fairly loaded poll I know, but I want to make it right.

Thanks,
Jamie
 

RedlineBrett

Senior Forum Member
REIN Member
QUOTE (infinity @ May 17 2010, 10:47 AM) I was thinking of offering the following.

agree to the asking price
give 10% down, and monthly payments at 5%, 35 year ammortization.

appraisal is actually 650k.
property is self managed.
I will still cashflow very well at these numbers

What I am not sure of is, how to do I exit this after 3 years so it makes sense for both of us?

Thanks,
Jamie

If it appraises at 650k and this guy could be a future money partner with you then definitely give him his price. 5% is a fair rate , 35 yr am is pretty standard.

He`s likely looking to get out of the management... if he is hoping to get into commercial he may want to tap the equity in the property at some point because you need larger DPs for commercial purchases. Who knows though.

If he wants out after 3 years you would just need to refinance with another lender to back out the balance of the loan he is giving you. You`ll need an extra 10% to put down at that point minimum... perhaps a full 20% of whatever it appraises for 3 years from now.

If it is cashflowing really well don`t plan to sell it in 3 years... plan to keep it forever. What else would you rather own??
 

jseib

New Forum Member
Registered
This deal sounds very good and congratulations on putting the leg work into finding it!

Since you asked for opinions though I will share mine


If I was sitting in your office right now looking over the deal the first thing I would ask you is:

How did the issue of owner financing come up? More specifically were you negotiating a selling price and in order to justify paying more then you wanted did you or the seller offer owner financing or was it offered by the seller right from the get go..

The reason is there is almost always a major motivation for a seller to offer owner financing, especially when a building cashflows well above the monthly fees the seller would be collecting.. If I am making $2000/month on a property after all expenses including property management.. Why would I sell it to you for $1800/month? (I just made all those numbers up)

If you don`t know the why then I would keep looking at the deal until you do..
 

RenManlolo

Inspired Forum Member
Registered
Hi,

I i`d like to bump this topic again as I`m curious as how this transaction has turned out.

Thanks,
Ren
 

Pheenix

Inspired Forum Member
REIN Member
QUOTE (infinity @ May 17 2010, 01:26 AM) . . .What are some possible offers out there that would make this work?
Hi
There is a similar thread under this topic Structuring VTB Offers- Advice Requested
in the General Forum.

Good luck

PS - And if anyone can tell me how to properly link to other topics I would appreciate it.
 
Top