How to pay off balloon payment - Any ideas?

[Darsh Patel]

Hi Everyone! 

I have come across a pretty exciting real estate deal and have worked out terms for seller financing on it. I only have to put 5% down on a portfolio of 11 SFH which is exciting because I could almost double my portfolio in a single deal and barely put any money into the deal. The seller has agreed to my seller financing terms but wants a balloon payment in 3 years. This is where I am worried...

I would need to come up with a $400K balloon payment in 3 years and I have no idea how I would do that. Does anyone have any ideas or suggestions on how I would be able to get the money to pay off the portfolio in the next 3 years? 

I really appreciate any and all feedback. 

Regards,

Darsh

[Dustin Beam]

Originally posted by @Darsh Patel:

@Dustin Beam Thanks for the reply. So is it possible to finance all 11 SFH into one loan or would I have to take out 11 different loans?

 I just added an edit to my first post, but the answer is yes as long as your bank will do it. I actually have exactly 11 townhouses under a single loan myself, but it's a commercial loan, which also has balloons haha. 

I do understand how balloons can be scary, but long story short, as long as your equity position in that property is strong in 3 years, you should be fine. Worst case is you sell them if you can't find financing, which again, if your equity position is strong, you'll profit. 

What you don't want is to owe the seller $400k and they are worth less and you don't have the cash to make up the difference. 

Ideally, they are worth at least $533k. 75% of 533k is 400k, which a bank ought to loan you that money to pay off the seller and under a new mortgage.