Is no cash triplex deal worth it?

[Tim DeFor]

I’ve got cold feet on putting in my first offer on a small multi family.

Triplex $185,000

Rents $1,650 (combined)

$3,000 rehab needed

I have a friend who will loan the down payment at 6% interest only until I can refinance. With current market rents and conservative (high) expense estimates, it will come short of cash flowing. I can’t get a conventional loan because of other projects I’m in the middle of. The seller is open to some creative financing.

My personal hesitation is that it may not be the right time. We are also purchasing 40 acres to rezone and subdivide into acreages, fixing up our current house to sell, and doing an addition and complete gut remodel of a house we are moving into. I’m also working full time. My head is swirling!

My question is, if we decide to go for it, how do you present a creative financing offer with an agent between? Slow conversation on a possibly fast moving house?

[Steve Smith]

Tim, First, sure looks like you have way too much on your plate and there's a thought to pass on this one and catch up and/or delegate some of your responsibilities to others. The "WE" you mention, can the other person do the land deal, and can your partner (wife?) manage the fix up and remodel? I would guess not... but you'd want to be involved. As for the triplex, first, the number aren't really attractive. If it were a single family home, I'd say go for it. As to cash flow and creative financings, ask the seller to be paid interest only at a low rate (like 2 or 3%, which you can explain is more than he'll get in a bank), and remind him that for an installment sale, he'll pay tax when the dollars are received. If he doesn't like 2%, tell him you'll increase the rate later on... perhaps 4% after 5 years.... 6% after 8 years, etc. I don't understand the "downpayment" until refinanced. Sounds like you'll be looking for 100% financing? Pretty hard to do. Why not sell your friend part of the upside for his downpayment?