Seller Financed, Buy and Hold, Multifamily Remodel

[Austin Gabriel]

Hello all!

My business partner and I are finalizing negotiations for a multifamily property in Southern California and are looking to have the LOI signed tomorrow. We are going to finance half of the deal and then the seller will finance the remaining balance.

The property is a 4-unit lot. One unit has burned down, it will need to be removed and then rebuilt. We are not taking that unit into our calculations. The rentable units are 4/2, 2/2. and 2/1. Only the 4/2 is permitted. Part of our Remodel consists of permitting the other units.

We came upon this property because we own a remodeling company in So Cal that focuses on partnering with the seller of a property to flip their home to sell for more $ and faster. Mostly we find ourselves in front of out-of-date and distressed properties. This one is no different.

Here are the terms of our LOI and the #s for the property.

Purchase Price - $670k ($100k above asking)
Seller Rebate to Us - $100k (Rehab Budget)
Seller Finance - $310k ($2133.33 /mo)
Traditional Finance - $360k (Est. $2.5k /mo)
Est. Remodel Cost - $75k (Includes carrying costs)
Current Revenue - $5k/mo (3 units)
After Remodel Revenue - $7k/mo (3 units)
Debt Service - $5k
Estimated Remodel Time - 3 months
Cap Rate - 6%


In the terms of our LOI, upon close, the seller will receive the $360k and give us back $100k. We will use that to conduct the Remodel on the property.

This is our second investment property but our first one that is this "complicated". We are looking for a good lender to work with on this deal.
Does anyone have any recommendations?

Also, I would love to hear your opinions on this deal in general. Thanks!