Balloon Lending for a 4 Plex - looking for help

[Carol Osman]

Hi everyone,

Looking for some help or direction on our first investment property, specifically with the seller finance balloon option vs traditional financing, thank you!

Below are the details: 

• 4 Unit Multi Family asking $249,000 
• $500 Rent Per Unit = $2000 Rental Income (all original tenants occupied since 2007)
• Asking Price = $249,000
• Minor Cosmetic to $0 Rehab
• Potential Rental Income in the area = $600 to $700 per month
• BiggerPockets Rental Calculator AS IS:

Monthly cash flow -$203 /mo

Income -$2,000 /mo

Expenses -$1,796 /mo

CoC ROI - 4.35%

Seller Financing option: 

• Balloon Payment - 20% down for 2 Year Terms @ 7% interest

We believe we can bring the rent to $650/unit within the first 2 months. 

What should we be considering with our financing options ? Any help is greatly appreciated!

[Diane Menke]

Ellis is right the information is not complete. 

The asking price is high given the rents.

The owner financing is also high at 7%, 20% down.

You should be able to get commercial lending, 20% down, closer to 4%, 25 year term. I would not pay more than the "1% rule" I like closer to 1.2-1.5.

Maybe work on your numbers on a few more deals, make it very comfortable to do the calculations. And find a commercial lending broker who will take time to educate you on the details of the #s.

Good luck! 

D