Who knows how to finance this deal?

Question

PP: $300,000

FMV: $350,000

Property details: Year round 3-unit with 3 seasonal cabins in Old Orchard Beach, Maine. Old Orchard Beach is a heavy tourism town with several colleges near by. The property is one block from a 7-mile beach (2-minute walk). Additionally, the property abuts a nature preserve and has no immediate neighbors.

Renting scenario #1: $1,000/month per year round unit. $800-$1200/week per cabin for 10 weeks during the summer (4th week of June through Labor Day weekend). Gross rent: $66,000 (without vacancy factored in.)

Renting scenario #2: 3 apartments could be rented seasonally ($1,000/week) during the summer and 9-month leases during the rest of the year to college students ($900/month) in addition to the 3 seasonal cabins. Gross rent: $84,300 (without vacancy factored in.)

With commercial lending at 25% down payment, $75,000 would be required; unfortunately I don't have $75k in cash. Does anyone have a suggestion on how to make this deal happen? Any advice would be greatly appreciated.

Jay Hinrichs · Answer

@Nick Burns this seems to be a common theme on BP these days.. those finding deals with no way to finance them.

My suggestion for whatever its worth.. if you have no capital spend your energy finding capital then go shopping.. you spin a lot of wheels and get excited only to not be able to pull the trigger.

I know some say if the deal is good the money will find you.. but for me.. I have done it in reverse all these years I got the money lined up first then executed.

and if this is your first deal.. then friends and family is who you want to be talking to..

good luck with it. the deal does sound pretty interesting for some folks

Jay Hinrichs · Answer

@Nick Burns sounds like a perfect set up to do a small partnership then.. !!! good luck

Nick Burns · Answer

@Azeez K.

Azeez,

All your ideas are great; I may explore the seller carry or debt partner options. Thanks for your contribution to this thread!

Nick Burns · Answer

@Jay Hinrichs

Thank you Jay for your input; I've always enjoyed your posts on other threads. This would be my second deal; I do have capital but not a sufficient amount for entire down payment, closing costs, etc. I agree, early on in one's investing career, you may have the best luck finding capital with the one's who you know best. Thanks for your advice.

Azeez K. · Answer

@Nick Burns

Here are some options to consider -

1. Debt Partners - Reach out to family and friends and see if they are willing to fund a portion of the deal for 6-9% interest.

2. Equity Partner - Find $ partner and give them equity for their monetary contribution. If the deal make sense you should have no trouble finding an Equity Partner

3. Seller carry - ask the seller if they can do a seller carry/finance for 10% and you put 15% or whatever split you decide. You can offer seller 6-8% interest on their 10% and pay them back in 6-9 months.

4. Lease purchase -self explanatory

5. Hard Money loan for the amount you want to fund. (Don't really recommend but if you have no options you can evaluate)

At the end of the day you want to give something in return to make it a win-win for all parties involved. So either give equity (sweat/$) or fair monetary compensation for debt investors. One tip be professional when presenting the deals to investors/family/friends. Make sure your numbers are rock solid and be conservative with your projections.

Good Luck

Ed Emmons · Answer

What are you willing to give for the money?

Who knows how to finance this deal?

Who knows how to finance this deal?

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