Cash purchase to Long-Term Debt. - Illinois

[Seth Holmen]

I lost out on a 4-unit building with a conventional financing offer. I need to refine my strategy and provide a stronger "cash" offer on the next one. I have a few ways to pull this off but I don't fully understand the timing and loan criteria. Any help here?

I have the ability to offer cash in a few different scenarios. 

1. Hard money from family. 

2. Home equity loan and temporarily pulling funds from IRA or 401K.

My big concern is how can I transition a cash purchase into long-term debt and how long would that take?

A cash-out refinance in an obvious one, but the banks seem less excited about doing that around here and require you to keep more equity in the deal and the interest rates are at a premium over a conventional loan. Also, some are saying they want you to hold the property for 6 months to a year before the refinance. Anything that can happen faster? 

Are there any other creative ways to make this work?  I don't want to keep the cash locked up for more than 6 months. 30-45 days would be ideal.  

[Kerry Baird]

If you are otherwise ready for multifamily, why not do direct mail to the 5 unit to 10 unit owners in your area?  Pull them off your local property recorder site.  Offer to buy with seller financing. These small multis must have commercial financing, which puts them off the radar of most other investors. Competition is reduced as many aren't even looking at that size deal. They are over the conventional financing size, but under the size that bigger investors prefer. 

Seller financing allows the seller to get a lump sum now, and still get a stream of income (from your new mortgage), and it spreads out the capital gains, which is a tax WIN.  I write all that up when I make offers, to show them the benefit of carrying a note back for me. 

I have a number of owner financed properties, and don't need a good FICO, they don't show up on my credit report (they do show up on my tax return, though).  Closing costs are much reduced.