70% convential with 30% seller finance

[Dustan Marshall]

I am interested in entering the multi family space but the cost of entry seem so much higher than the so how family units that have purchased so far.  My covnetional lender will lend up to 70% of purchase price.  And if I can get the seller to carry a second position note for up to 30% I would be able to gain ownership with little to no money Down.  Has anyone done this strategy?  If so how does it work?  Does the bank require some documents stating the other 30% is taken care of?  How do you address this?  Are you very open with conventional lender about owner carry back?

[Brian Adams]

@Davon Lowery, one LLC operating agreement will cover everyone and each member will need to sign the agreement.

Your investors are buying into the deal and are not on the board. My response to you about investors is that you are the operator, the man running the show - the quarterback of the deal whereby your investors are passive and are looking to you to make them money. Also I focus on large 100 to 400 unit apartment deals where the financing is non-recourse. Just to mention, normally if the loan is less than a million you could be in recourse financing where you and possibly your investors are personally liable for the debt.

So assuming you are the operator, the debt is non-recourse and your investors own less than 10% of the deal your lender doesn't need to know about the personal situation of the investor like the mortgage or unable to provide tax returns.

I am not an attorney, but anytime you are pooling funds from passive investors for the sole purpose of making a profit for them you are selling a security and the SEC world applies. Please know that the SEC rules aren't hard to follow, but make sure my friend to dot the I's and cross T's so you don't run afoul and get yourself in trouble. Recently I had a Q&A call with a securities attorney that covers all this good stuff.

Good luck!!