first multi family, looking for advice

[Koen Ballantine]

Hello BP first of all thank you to this awesome community for its knowledge and support over the last two years! i am a 20 year old investor who is in the process of a seller financed deal. the numbers are looking extremely well cash flow is about 1,000 a month, its a three unit with all utilities not included. Next to a private school and the roof and foundation are new or in great condition. Furthermore its first two units are great and can be moved into, the top unit needs some modernizing in terms of cosmetics but other then this is fine, i also will ensure to have it inspected and collect a report along with my due diligence. The problem is this is my first deal and its seller financed, now I will be completely honest, my knowledge in terms of finance dealing with the bank is rough to say the least due to lack of experience, the seller has mentioned a balloon payment and i have never refinanced a house before, what are my risks in terms of a bad refinance and what is any ones advice or some tips you might have in terms of renting and things to be careful of?  I just want to make sure im not going over my head if anyone thinks i left something crucial out let me know thanks for all advice and questions!

[Mike D'Arrigo]

@Koen Ballantine I would need to know more about the finance terms. How much do you have to put down? What is the current interest rate? When is the balloon payment due? There's a real risk there. When that balloon comes due and you have to refinance, you're rate will be subject to the current market rates at the time. Interest rates are at near historic lows. It's pretty much a given that you will be facing much higher rates when it comes time to refinance, especially with current rate of inflation. I would recommend doing a stress test making some assumptions about future rates and at what rate you will no longer have positive cash flow. I also wasn't clear on who is paying the utilities. Is it the landlord of the tenant? Utilities are a big uncontrollable variable You need to know if you'll be paying them. If so, get at lease a 1 year history on the expenses. You should also ask for a rent roll and maintenance records. Do your due diligence and don't just rely on what you've been told.