Found a multifamily - Proof of cash to see it
Scott RosslowPro Member
West Palm Beach, FL · Member since 2017 · 29 posts · 6 votesI found a multifamily property that I want to buy and hold. The listing agent is requiring that 100% proof of funds for the asking price to show the property. I am partnering with my dad who gave me a bank statement with 50% of the asking price in the bank account. I don't think I can qualify for a loan for the half and I don't want to expose my dad to that much risk as its my first rental property. I would like to see the property to either know if I should adjust my offer or how else I might structure a deal.
We were looking into maybe use creating an LLC together and trying to get a mortgage for the LLC and him maintaining 51% control of it until I was able to cash him out.
Does anyone have any advice?
@Scott Rosslow You might be asking two different questions:
1.) How do you get to see the property -> While the listing agent might want 100% proof of funds I'd be surprised if having 50% of the asking price in cash wouldn't get you in the door. Maybe you need to have your dad ask instead of you. What does the buyer's agent you're working with think? Then again the seller may have instructed the listing agent not to show something without proof of funds.
2.) How do I get the loan for the balance of the money -> That really depends on if it's a under-4 unit property (conventional financing options) or a 5+ commercial property. For the latter your best bet is a local/community/regional bank. The challenge is that your dad may have to come on the loan and they are often full-recourse loan. That's a whole different ballgame as far as risk goes. Even if you establish an LLC the bank may still require a personal guarantee.
Net result: you need to be talking to banks now. It doesn't do you any good to find a property that you can't qualify for. And if you only like properties you (and your dad) can't qualify for you have better have a heart-to-heart with your dad about alternative funding strategies. Buying off on a conventional mortgage vs. a full-recourse loan vs. other strategies can all be very different things (even for a dad).
@Scott Rosslow You might be asking two different questions:
1.) How do you get to see the property -> While the listing agent might want 100% proof of funds I'd be surprised if having 50% of the asking price in cash wouldn't get you in the door. Maybe you need to have your dad ask instead of you. What does the buyer's agent you're working with think? Then again the seller may have instructed the listing agent not to show something without proof of funds.
2.) How do I get the loan for the balance of the money -> That really depends on if it's a under-4 unit property (conventional financing options) or a 5+ commercial property. For the latter your best bet is a local/community/regional bank. The challenge is that your dad may have to come on the loan and they are often full-recourse loan. That's a whole different ballgame as far as risk goes. Even if you establish an LLC the bank may still require a personal guarantee.
Net result: you need to be talking to banks now. It doesn't do you any good to find a property that you can't qualify for. And if you only like properties you (and your dad) can't qualify for you have better have a heart-to-heart with your dad about alternative funding strategies. Buying off on a conventional mortgage vs. a full-recourse loan vs. other strategies can all be very different things (even for a dad).
@Scott Rosslow You'll have some option if you have that money down. In Multifamily Financing it's more about the property and property income than about personal credit and income. Let's connect I can help you with a few options.
I would tell the agent , if you want to sell the property , I will look at it and if I am interested I will submit proof of funds with my offer . I wouldnt show any real estate agent bank statements or anything else for the privilage of looking at a property .
Get your own agent , a buyers agent to look at the house . They wont let something like that get in their way
@Scott Rosslow You might be asking two different questions:
1.) How do you get to see the property -> While the listing agent might want 100% proof of funds I'd be surprised if having 50% of the asking price in cash wouldn't get you in the door. Maybe you need to have your dad ask instead of you. What does the buyer's agent you're working with think? Then again the seller may have instructed the listing agent not to show something without proof of funds.
2.) How do I get the loan for the balance of the money -> That really depends on if it's a under-4 unit property (conventional financing options) or a 5+ commercial property. For the latter your best bet is a local/community/regional bank. The challenge is that your dad may have to come on the loan and they are often full-recourse loan. That's a whole different ballgame as far as risk goes. Even if you establish an LLC the bank may still require a personal guarantee.
Net result: you need to be talking to banks now. It doesn't do you any good to find a property that you can't qualify for. And if you only like properties you (and your dad) can't qualify for you have better have a heart-to-heart with your dad about alternative funding strategies. Buying off on a conventional mortgage vs. a full-recourse loan vs. other strategies can all be very different things (even for a dad).
Thanks for the reply. I had my agent send over the 50% proof of funds. My dad has enough in other accounts to cover the 100%. I just thought it was weird they wanted to see 100%. I just really don't want to go 100% cash down (thats how my dad always invested) and its all his money. If I did that I am not sure how well I can refinance it.
Its listed as 5 units. It is two houses so I will need commercial financing which I honestly don't know much about. We talked about coming in on the deal together, I just don't want to end up keeping his money tied into it for very long.
I have a weird feeling that them not wanting to show the property without 100% proof of funds has kept the property on the market for this long.
I would tell the agent , if you want to sell the property , I will look at it and if I am interested I will submit proof of funds with my offer . I wouldnt show any real estate agent bank statements or anything else for the privilage of looking at a property .
Get your own agent , a buyers agent to look at the house . They wont let something like that get in their way
I have my own and we both thought it was ridiculous, the only reason I am still intrigued is because maybe this has happened to everyone before me. Maybe if I go the extra mile it can pay off?
@Scott Rosslow Devil's advocate: it might have been on and received offers in the past that have fallen through due to financing. Tenants do get spooked when properties are up for sale. It's not that fun or an owner or PM to coordinate even 5 tenants letting in a potential buyer to look around. I know you just go in (with proper notice) as a landlord but you really tick off tenants if it happens a lot. I know if I was selling any of my multifamily properties I'm not going to let anyone just wander around through occupied units. It might limit my buyer-pool but the last thing I want to get is going through the hassle (and it is one) of letting people walk through just to get an "owner financing" offer.
So if I put myself in the position of a seller I completely understand why I there do want/need there to be some prequalification of the buyer. But I have to admit, if I saw 50% of the funds sitting in a bank account I think that would easily cross the threshold. Other owners (and agents) may have vastly different opinions on their thresholds.
On a side note, having the cash and showing that you have the cash doesn't mean that you have to give an all-cash offer. It doesn't even mean that in an offer you can't still have clauses dependent on you getting financing. At this point it might be more of a "shut up and let me tour the place" item.
@Scott Rosslow Following up what @Andrew Johnson says, the property may not actually support the price that the seller is asking, which would lead to offers falling through as banks reject the buyers' overly optimistic underwriting to support the required debt service coverage ratio. My banker friends report to me that they see deals falling out a lot recently because of this phenomenon.
Very likely, the seller is looking for someone who is willing to make an all-cash offer and pay all cash for the property because the banks have already turned the other buyers down. In reality, the market is speaking that this asset is overpriced, but the seller is holding out hope that someone who NEEDS to spend cash will come along and pay the price in the midst of this market frenzy, like someone who needs to do a 1031 exchange to avoid getting hit with a very large tax bill.