Owner finance historic commercial redevelopment opportunity

[David Deal]

Hi all,

New to BP, looking forward to sharing and learning!

I am looking at a historic property, about 25,000 SF in a CBD in a small/medium east coast city. It is a historic building that has great bones, but is a full gut rehab job. We made an offer proposing a typical 180 day due diligence period with plans to work with a local lender. However, the owner wants a 60 day due diligence period; we aren't a cash buyer so it seemed off the table, but he has offered owner financing. General terms (so far) are $750 k offer price with 15-20% down; our broker believes the land is worth about $500 k, the tax records list the property valued at $60 k (we know it worth quite a bit more than that based on some recent comparable sales.)

So a couple initial questions are; has anyone ever used owner financing as a tool to acquire a property and then subsequently worked with a more traditional lender to refinance (shortly)thereafter? I'm assuming it's a good idea to get an existing conditions appraisal done even if going the owner financing route? What if the appraisal is lower than our offer--is that an automatic walk away sign?

We have a vision for the project (mixed use or boutique hotel) and have been discussing the concept of a development to-be-completed appraisal which the bank would then loan against, but how long should we be prepared to hold the property while working with lenders on that approach?

I'm sure this post will lead to more questions, so please feel free to let me know what they are, and any insights are appreciated!

thanks,

Dave