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Updated over 3 years ago,
How can I structure this deal with no money down?
Hello! I need some help here. A little disclaimer: I'm not an expert. My back-of-the-envelope is kind of basic but I think it works. I'm not from the US-Things work a little different in here.
I found a pretty sweet deal where I have a competitive advantage due to my job, it's more like a flip but I want to hold it at least until year 4. I could buy a small really well located commercial area (2152 square feet). The commercial space is not finished. It's like gray in core & Shell and work needs to be done. I already have some LOI's signed with several tenants (I'm in charge of renting the space) BUT if I make an offer for the commercial space I could get it for $300.000,00 (a lot less than asking price) I have to do the basic finishes for the tenants (tenants with a great record) and that would take me around $250.000,00 so, it's a $550.000,00/$600.000,00 deal. I could rent all the space for $7000 per month (around $80k per year considering taxes) on the first year and around $115.000,00 on year 3 (This was the agreement with the tenants and they are fine with it).
Ok, now the investment part: 1- My first option is to get a bridge loan. I can get it around 10% IR (a regular bank would ask me DP, and I don't have it atm, so is private money) That would leave me, paying just interest for at least 3 years, and then I could sell the property at around 10% cap and get $1.150.000 ($550.000 gain on 3 years with no money down- sound good to me). I'm just afraid the LTV of the commercial area is not going to be enough and I can't get the loan.
2-My second option is to give the opportunity to buy the property with my discount to a friend of mine to purchase the property and make the construction. I could be the only tenant for her and then I can sublease the place for a profit. She will be happy to do this because this commercial area is a really unique space and there's a high chance of success. She will spend the $600.000 and I will pay her around $5000 rent for the entire area, and I could rent it around $7000, (2k profit per month is better than no profit at all). I was going to ask her if she sell the place on year 3, I could get a 15% profit on the sale price, just as a premium for getting her the deal.
I appreciate any comments.