Need Help: Creative Deal Crafting!

[Reece Weatherford]

Hello BP! I’m a senior at the University of Arizona and I’ll be starting Navy flight training in Pensacola, FL next year. I’ll also be starting my real estate investing career. I need help crafting a unique deal. 

I’ve been researching the Pensacola market for the past few months and I have found an excellent small multi family that cash flows well and suits my goals. 

The sellers own the property free and clear, two units are currently rented, and the third is move-in ready. Their reason for selling is one of the owners passed away and they are selling off most of their rental properties. My only problem is that I can’t close on anything until May next year. 

I’ve been negotiating with the sellers to structure a deal where I place it under contract now with a COE in May. They can choose whether or not to place tenants in the third unit. This arrangement would actually be beneficial to both of us, since they’d be collecting the rents for the next 7 months that they’d miss out on if they were to sell today. 

I’m trying to craft this deal in a way that is safe for both parties. The sellers are very reluctant to agree to sell something 7 months down the road. I’ve offered a written contract to be recorded with the title company, proof that I will be commissioned as a Naval Officer in May, and proof of funds (just got pre-approved with a local lender).

I really want to make this deal happen. The sellers are open to negotiating with me, but they want to make sure they are protected. One of their concerns was if the house burns down or gets ravaged by a hurricane in the next 7 months. How can I mitigate the risk to them? 

This is a unique situation, and I appreciate your time in reading it and offering any advice. Thanks!

Reece

[Patrick Daniel]

As far as covering asses is concerned, did they mention what specifically they were worried about?

They haven't really sold you the property until the goes into your name. 

You could just have them lease you the property and have them allow you to sub-lease it, but that does not help with the coverage of liability for them.

Best thing I can think of that would cover both of you is to create a seller financing deal where they sell you the house for the agreed upon price and you make principal and interest payment to them on a 20 or 30 year amortization schedule, but have a balloon payment due to them in 1 or 2 years for the total amount due.

This gets the house in your name, and you can refinance it into an FHA or VA once you can qualify for it, but also covers them, because it is out of their name, and they will be getting the lump sum in a year or so. If you do not pay when the balloon is due, then they can foreclose and they will have the property it back.

As always, not official advice, just options that I would look into if I were in your shoes. 

-Patrick