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Updated about 9 years ago,
How Much Of A Premium To Accept For Good Seller Financing
I am working on trying to put together a deal on a multi family building and wanted to get some feedback on how much extra I can pay for a property in exchange for receiving seller financing.
The property is a 30 unit building in Brooklyn that is rent stabilized and therefore the NOI of the property is significantly less than what the potential for the building would be. The average rent in the building is $1,130 per unit based on a unit mix of 1-2 BR units. The average market rent is easily double that with minor upgrades needed in some of the apartments.
Expenses on the building are about $100k per year leaving an NOI of approx $300k with the in place leases.
As a cash deal the price that the seller wants makes no sense at all. The seller is looking for a 3.5 cap or a sales price of $8.5mm. I would be happy paying a 5 cap for the building with all the potential upside.
I introduced the concept of the seller financing the sale and explained all the benefits to the seller. The seller seemed to be very interested and was going to do some research and get back to me.
Since we are pretty far apart on the price on a cash basis, I want to get your thoughts on how much of a premium you would be willing to pay and can justify by getting very good seller financing terms.