First Real Estate Investment - Multifamily 4 Flex

[Fong Xiong]

First off my name is Fong, I'm 29 years old, I'm very new here. I have been listening to David and Rob for weeks on end on their podcast on my commute to work and have read through a few books from Brandon Turner and it has given me hopes on eventually being able to escape my 9-5 job. Have bought many other books in preparations from other successful investor such as David and Rob but in the saying of Brandon, "it doesn't matter how many books I read but if I don't take any actions it's all doesn't lead anywhere." So here's me taking my first big step to financial freedom. I also apologize in advance but I'm really "green" in regards to real estate and not 100% confidence yet in my capabilities but I have chance upon a opportunity on this property that I'm looking to give it a shot.

Long story short, I chanced upon a 4plex multifamily home with 16bds 8ba near where i went to college and it's a few block from the University. The avg rent around the surrounding areas are about 1700-2200 for a 4bed 2ba apartment.

PP asking is $620,000 at 4% IR

Using the Rental Property tool I would cash flow about $1600 monthly after all expenses and with a CoC ROI of 9%.
I would need about $20-30K rehab: new carpets, new paints inside, new tiles.

My inquiries is, what are some creative finance idea could I pitch to the seller and his agent in regards to his equity of the property which is about $70k if they are willing to do a subject to deal for the property?

In what ways can I structure a deal that would still make a profitable cash flow if I have the owner seller finance me the $70K? Or should I just outsource for a private money loan for the 70K?

Thanks in advance for any tips and advice!

[Arif Sheikh]

Quote from @Fong Xiong:

First off my name is Fong, I'm 29 years old, I'm very new here. I have been listening to David and Rob for weeks on end on their podcast on my commute to work and have read through a few books from Brandon Turner and it has given me hopes on eventually being able to escape my 9-5 job. Have bought many other books in preparations from other successful investor such as David and Rob but in the saying of Brandon, "it doesn't matter how many books I read but if I don't take any actions it's all doesn't lead anywhere." So here's me taking my first big step to financial freedom. I also apologize in advance but I'm really "green" in regards to real estate and not 100% confidence yet in my capabilities but I have chance upon a opportunity on this property that I'm looking to give it a shot.

Long story short, I chanced upon a 4plex multifamily home with 16bds 8ba near where i went to college and it's a few block from the University. The avg rent around the surrounding areas are about 1700-2200 for a 4bed 2ba apartment.

PP asking is $620,000 at 4% IR

Using the Rental Property tool I would cash flow about $1600 monthly after all expenses and with a CoC ROI of 9%.
I would need about $20-30K rehab: new carpets, new paints inside, new tiles.

My inquiries is, what are some creative finance idea could I pitch to the seller and his agent in regards to his equity of the property which is about $70k if they are willing to do a subject to deal for the property?

In what ways can I structure a deal that would still make a profitable cash flow if I have the owner seller finance me the $70K? Or should I just outsource for a private money loan for the 70K?

Thanks in advance for any tips and advice!

Hello Fong,

Welcome to the world of real estate investing! It's great to see your enthusiasm and determination to take the first steps towards financial freedom. Your interest in creative financing is a smart approach, and it's important to explore various options to make your real estate investments profitable.

Regarding your potential 4plex multifamily deal, here are some creative financing ideas you can consider:

1. Seller Financing: You mentioned the possibility of the owner providing seller financing for the $70,000. This can be an excellent option if the seller is open to it. You could propose a seller carry-back mortgage where you make regular payments to the seller instead of a traditional lender. Negotiate favorable terms, such as a lower interest rate or longer repayment period, to improve cash flow.
2. Subject-To: Subject-to deals involve taking over the existing financing on the property "subject to" the existing mortgage. If the seller has a low-interest rate loan, you might consider taking over their mortgage payments and assuming the loan. Be sure to consult with a real estate attorney or expert to navigate subject-to transactions effectively.
3. Private Money Loan: If seller financing doesn't work out or isn't available, you can explore private money lenders for the $70,000 rehab and any down payment required. Private lenders might offer more flexible terms compared to traditional banks.
4. Hard Money Loan: Another option for financing the rehab portion is a hard money loan. These loans are typically short-term and come with higher interest rates, but they can be a quick way to secure funds for renovations.
5. Partnership: Consider partnering with an experienced investor who can provide the necessary capital in exchange for a share of the profits. This can be an effective way to tap into someone else's resources and knowledge while sharing the risks and rewards.
6. Lease Option: You could propose a lease option agreement with the seller, where you lease the property with the option to purchase it at an agreed-upon price in the future. This can give you time to build equity and secure financing.
7. Seller's Second Mortgage: In addition to seller financing, you can negotiate a second mortgage with the seller for a portion of the purchase price. This can help bridge the financing gap and reduce the amount you need to borrow elsewhere.

Remember to conduct thorough due diligence on the property, including a detailed inspection and analysis of the local market conditions. It's also crucial to consult with legal and financial professionals to ensure any creative financing strategies comply with local laws and regulations.

Lastly, continue educating yourself through resources like BiggerPockets and networking with experienced investors in your area. Your willingness to take action and explore creative financing options is a promising start to your real estate investing journey. Best of luck with your deal!