Creative financing options

[Roman Rytov]

Folks, with rates in mid 6% and CAP 7+ the "standard financing" (20-30% down, 25 amortization, 5 balloon) makes no sense. Cash-on-cash return is in mid 5 with these numbers. What creative options for financing can we consider? I'm asking my banks for longer amortization or an intro rate for 2 years (risky, I know, but with a hope that the rate will go down to the 5% zone), interest-only loan. What else to consider? I'd assume that the banks need to deploy their money as well and the numbers just don't make sense.

I realize that what we have on the market today (available through LoopNet, for example) are not good deals - all of them are in the 4.5-6.5CAP range which makes no sense with the current interest and explains why these deals are not closed. 

I also understand why a cash generating property is not sold unless for a very good price. But what do you guys do to a) find good deals and b) finance them?

[Brett Deas]

a) "good deals are not found, they are made" is especially true in this market. It will take time and effort to make these deals great, not only because it's in a high interest rate environment but because good deals are extremely rare anyway.

b) Financing my properties is one of the biggest challenges, because I go after very unique deals. But, typically I will call around 7-8 brokers which gives me a massive reach of loan options. I also am very upfront with the sellers, especially on the bigger deals. Typically the sellers are willing to help me out with some sort of SF or flexible contract terms.