I need creative financing suggestions

[Ron Averill]

I'm currently in negotiations for an off-market deal involving four houses. These will be buy-and-hold properties. The seller is retiring from the business. The total selling price will be below the total of the current mortgages on the properties, so the seller will have to bring money to the closing.

I would like to find a creative financing approach that would (1) help the seller to bring less money to the table or to spread out this cost, and (2) delay my need for conventional mortgage(s) until I complete the rehab work. 

Is this a good candidate for a wrap? I don't have any experience with creative financing, but I've read some impressive concepts here on BP, so I'm hoping someone will have ideas for this situation.

Suggestions?

[Bill Gulley]

And the seller is okay with paying the balance?

You can buy subject to at a lower price than the liens, he gives you a special warranty deed. State the lower price with the balance due from the seller or crediting him with him making a note to you.

You could pay the interest and he pays the principle reduction say for 90 days or what ever you agree to.

You can also simply contract for the work to be done. Start work at your bid price. In a separate purchase contract set a price that covers his sale price and your bid. Keep records of your costs. Simply set closing off 90 or whatever days or to completion.

If he walks, you have a lien and a contract to rely on.

You can credit your money for the rehab back to your purchase washing out the cash transaction but including it for your costs of acquisition, you'll have a profit on the job if you charge one.

You could also do a purchase contract, possession prior to closing, go in and work, if you need permits he will need to get them. This is easy but you only have the contract to rely on.

An option really isn't good here.

Before you go further you need to get with him and see who is going to pay what until completion of the work, someone has to pay the mortgage, someone has to pay for materials and labor. The benefits of either or both can be found and adjusted to the price.

You could also buy subject to and finance back the difference owed the lender secured by some other asset, if he has one, that could be a balloon since this is commercial I assume.

You could carry that difference under a separate note at a higher interest rate, you could carry it as long as you feel comfortable with being in a sub-2 with another lender.

If you sell, you need to give notice on a interest only call note, if he can't cover it you need to pay it, and you could keep that note with him or proceed under the default provisions and seize collateral.

I don't know enough about the time requirements or circumstances to go beyond these basic strategies.

If I hadn't taken my pain meds for my back after falling on my tail off my truck, I might add some more, this comes to mind first.   :)