6 Unit Seller Financed Deal

[Brandon Allenczy]

*Detailed Post*

Hey BP!

I have an awesome opportunity to purchase a 6 unit apartment building in a fantastic location 2 blocks from my home. My problem is I just can't figure out how to finance this thing. Let me just start by saying this is a very long term play for me. Day 1, it's an OK deal. 5-10 years from now, it's a pretty good deal. But retirement age, this thing is an absolute slam dunk.

A seller (with whom I have a great relationship) has a 6 unit that is around a 6% cap rate in a great area. My realtor (huge investor in the area) told me a 6 cap in this area could appraise for $500K depending on the condition. The collective rents are about 70% to market value, so there is a lot of value add here. It needs some exterior  work and some interior cosmetics, but the units themselves are in pretty good shape. The seller is asking as close to he can get at $500K but I think it would appraise for around $445K-$465K.

The owner is willing to finance, but only hold the note on around $300K and have the rest upfront. I don't have that amount of cash available, and am trying to figure out what to do. Below are the options I've considered, and the roadblocks I'm hitting. PLEASE let me know what thoughts/other ideas you have.

1. Seller holding the note on $450K and bringing $50K as the down payment.

Roadblock: After negotiating, the seller just needs more money up front.

2. BRRRR using hard money/private money

Roadblock: In order to do a clean brrrr, I'd have to get this at a pretty crazy price for the seller (around $350K).

3. Having a local bank fund the DP (Currently in progress)

Roadblock: I spoke with my bank and the guy told me they might be able to give me a business loan as the DP and I was overjoyed, but over the weekend I remembered they will probably want to see a collective LTV on the property of around 75%-80% including the seller's note. So that leaves me with still needing to come up with a huge chunk of capital. If I borrow capital from 3 places, are there risks of crowd funding? Am I over leveraged? Even with 3 notes, the cash flow would still be a couple hundred/month.

I own 2 duplexes in the area, one of which I have around $60K of equity in and it cash flows about $200/month. Possibly 1031?

I'm crazy about this deal because like I said, day 1, this property cash flows around $300 (not great for a 6 unit). But after raising rents appropriately and making improvements, this will just get better over time. I estimate in around 5 years I could bring cash flow up to around $1200/month. In 30 years when I'm retirement age, this 1 property could literally be our retirement, adding $500K to my net worth and $6-$7K/month in cash flow.

Thanks for your help!