Creative Financing for Commercial

[Karma Senge]

What are all the different ways of creative financing that you can do in commercial real estate investing? Are they the exact same as in residential? Can you do things like owner financing when working with a broker on a property?

Thanks

[Account Closed]

Aly,

If your seller is motivated and his equity exceeds 20% of the purchase price, then you've got the makings of a deal. I assume that you're buying this property because you believe that you can add value to it (i.e. increase the NOI). The best situation would be that the seller has an existing assumable loan. You would assume that loan and have the owner hold a second for the balance between your down payment and the loan, with a 3 year balloon. The first year you increase the NOI, the next 2 years establish stabilization for a new valuation for a refi loan. If you refi with a 65% LTV, then you only need a 23% increase in value ($800,000/.65) to refi the first and second in 3 years. If you can get 70%LTV, it's only 14%. Also, I didm;t account for any principal reduction in those first 3 years, which would lower the refi amount. That all assumes that the property cash flows.