9 Unit Historical Multi Family Creative Finance Deal

[Kevin Naimoli]

Hi All,

I have an interesting deal here. My seller owns a historical 9 unit multi in New Haven CT by Yale which he has owned for 63 years. The time has come for him to consider his exit from the property. In the last 2 years he transferred the property into an S-Corp from a C-Corp for taxation purposes. To avoid double taxation the asset must be held for 5 years so he cannot legitimately sell the property until that seasoning period is honored. The catch here is that his 10 year mortgage balloons mid August of this year to the tune of $850k. His current plan is to have another investor pay off the mortgage which he would pay 7% interest to the provider of said funds for the 3 years until he can sell the property. This balloon payment would act as the down payment on the property in the form of a first position and a promissory note would be signed so that the end buyer has the right to purchase in the future. A final sale price would be later agreed upon by both parties. The apartments need to be renovated/brought up to-date and rents raised to market rate, this is where the value add lies. Current cap rate is around 6-7%, waiting on rent roll to confirm NOI. With all that said he likes the idea of selling to me, a young architect, based out of New Haven. My issue is that this deal exceeds my experience level nor do I have the money to put up for it. I would appreciate any advice. Thank you!