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Updated over 9 years ago,
Purchasing 2 9-unit multi-family properties from same owner HELP!
Hi all,
I'm making my first post, as I look at starting off in multi-family REI.
I have identified two properties that are being offered by the same owner in the midwest. They are not currently listed. They are being listed for a total of $1.2M. They are cash flow positive (10% return on equity DP), in good condition, and sound buy-and-hold investments with long term upside (cap rates around 9.5).
My questions largely surround financing.
I am a filmmaker and so have a very up and down income. Some years it's high, some years very low. As such, I don't have the traditional steady pay of a "regular" job. I do have some cash saved. I also have my mother, who is eager to help me with down payments and/or partnering so her current, regular income ($130K/year) might be applied toward my financing deal if we partner in some way.
We could form an LLC, and then try to get a commercial loan, but then it appears that our only option would be something in the 30% down and 5% loan range. We can manage 20% down, but 30% will be a stretch. We both have 800 plus credit scores.
So I'm appealing to the BP community! Are there any other options that might be available to us? Some thoughts I've considered but don't know if they are feasible:
1) Could I owner-occupy one of the apts in the two properties and somehow be considered for a residential loan that would cover both? In this case my mother would probably act as a guarantor? Would they require my mother (instead of me) to owner-occupy to qualify? Does it have to be her primary residence? (she is retiring next year but will maintain a $100K+ income from annuities and pension etc.).
2) A variation on the above idea might be to buy the two properties separately. I owner-occupy the more expensive of the two to get better terms there, and then we buy the other under a commercial arrangement.
3) The owner was willing to do a land contract with a prospective buyer in the past, but that fell through and now he won't do a land contract (he is quite old and just wants to cash out). However, he does appear to be open to "creative" financing, and someone mentioned he might take a 2nd. Despite a bunch of reading, I don't know how that would really work in this situation, because, again, I would only be bringing 20% cash to the deal.
Thanks in advance for any help/suggestions. I'm just starting out in this world but very excited for the future!