Buying my first multi family investment property

[Khari Harper]

My partner and I plan on buying a 5 family with a potential 6th unit in Irvington NJ. Before we purchase I had a few questions. 

The owner is open to seller finance. Is that something you would recommend doing even if he has a mortgage? If I do sellers finance will I still be able to refinance with a bank? 

3 of the units are vacant & need rehab done.  

This is my first deal not as a wholesailer. I feel like I am ready to take the next step but I just want to make sure I am not biting off more than I can chew.   

[Steve Olson]

Hi @Khari Harper, great question!  I can help with some general knowledge here, but there may be some specifics for New Jersey that you'll need to check into with an attorney in NJ.  

If bottom line is if you can service the mortgage (because that will still be due) + any additional payment the seller requires for the seller financing, it could work.  Sometimes you'll get a seller that just wants out, so all you'll need to do is service the mortgage with no additional payments.  

Once title transfers, that mortgage lien stays with the property and would be paid off when you go to refinance.  

There is of course, all the typical "due on sale" clause stuff, meaning the bank could in theory call the mortgage due if the seller transfers title to you.  I won't pretend to be an attorney on that...I'll just tell you I've done it and that banks usually don't mind as long as the payment is being made.  

One trick too...you'll need to make sure you get the insurance straightened out.  The mortgagee (bank) will want an insurance policy on file and if the seller sold the property, they can no longer get insurance on it.  So when YOU go take out the insurance, the policy will be in your name and the bank may have questions and heartburn over that when all of the sudden a policy shows up that's not in the name of the borrower they have on file.  

Some people on here have done this a lot and can likely give you some great input, but these are a few things that I have found are useful to think about.  Good luck to you!