Down Payment Strategy

[Kimberly Harten]

New investor in Northern NY. I have an 8-unit residential pending contract submission for 120k.

ARV is 150k; which will likely be accepted in northern NY. If appraisal comes in the same or more I'll have at least 20% equity.

Financials on property are good according to commercial loan officer pre-contract conversation.

My Bank will lend up to 85% LTV on commercial.

Do I have to provide my RE contract to the bank as part of the commercial loan process? I'm trying to understand how to get this process accomplished without putting a 15% down. I have the cash but I'd rather keep it.

Any advice on if or how this works? I've heard that people establish their down payment by the seller holding a second mortgage. How does this get contracted and reported to bank. Or does it even have to be reported. The point in a down payment seems to be skin in the game concept BUT if I can negotiate a contract for instant equity didn't I put skin in the game?

Any advice on how to accomplish keeping my cash instead of using it for a down payment?

Thanks

Kim

[Cody L.]

If the as is appraisal supports it, RAISE the price and do a seller credit for same. This lowers costs to close.

I just agreed on a price to buy this property for $5.9m. I know it'll appraise at 7m easily. Wrote contract up for $6.5m with a $600k credit (seller still gets his $5.9m

Down payment will be 20% of $6.5 ($1.3m) minus $500k (so $800k). If I bought it the "normal" way I'd need 20% of 5.9m (almost 1.2m)

So this trick saves me $400k needed to close and means I'm really closing with closer to ~12% of our agreed price down