First bulk SFR deal - not enough of my own cash - options?

[Doug McLeod]

Ok BP pros - looking for some advice. Would appreciate your thoughts or a referral. I found a 4 house bulk deal of tenant occupied homes near me that the seller is offering at about 78% of ARV. Total price is just under 500k. I need to walk the properties to see if I need to budget for make ready (as appears to be the case from the offering description) or bigger repairs - in which case I'd need to negotiate the price down. I've run the comps (broker is not overselling the value or rents) and it looks like it could be a nice gain selling in 2 years (slow flips). Rental cash flow is adequate to cover all expenses, maintenance, cap ex, vacancy, and management (though I will likely manage myself), but not much else - this would primarily be an equity play.

I'm low on cash due to my 8 acquisitions over the last 24 months. I'm thinking to borrow the gap or find a few cash partners (1-4), but I want to think through it carefully. Here are some possibilities:

1) I can bring about 30-40k.

2) I can get financing through one local bank (so they tell me) for 80% of purchase + rehab at around 5% amortized over 25 years with the rate fixed for 10 yrs. This requires me to bring about 120k to closing (including my 30-40) and have another 15k for make ready (more if there is real work needed, but let's assume for now the houses are more or less rent-ready). Should I:

a) borrow the 80-90k gap from friends and family at 6-10% interest only for 1-3 years, which will give them an ok return and eat a chunk of my cash flow but leave me with all the equity gain upside?

b) offer to bring some of the above friends and family in as equity partners and share the gain (more returns for partners, more paperwork for all, less return for me)

c) are there other alternatives I should consider to close my cash gap?

3) If I use private / hard money at 75% ARV at 12% for 2-6 months (which I have access to) I could get by with less money out of pocket and increase my rate of return, but I can't use Fannie/Freddie conforming loans to refinance out because I already have 9, so . . .

a) Would it be possible to finance 75% of ARV at purchase for 2 years at a lower interest rate with a private lender, bank, or some else's IRA money - say 8% interest only? Is that available out there somewhere?

b) Or what commercial / portfolio lender options might there be that could refinance me out of the high rate private/hard money in 2-6 months that would make sense if I'm planning to sell in 2-3 years? I'd really like to refi into something close to what the local bank is offering as mentioned above, but at 75% of ARV instead of 80% of purchase + repairs.

Either of these options would allow me to get by with only 50-60k in total cash.

I am leaning toward 2) a) as the easiest option, but not the highest return one.

3) a) seems attractive if I can get it. The higher rate with interest only might work out OK with potentially lower transaction costs and not having to refi.

3) b) is similar to how I've done my last several SFRs (so it feels "known"), but I had Fannie/Freddie for those refi loans. 6+% rates plus principal and 20 yr amortization periods make this less attractive, but can I find local banks or investor friendly lender who will lend 75% of ARV at ~5% with 25 yr amortization? I could accept a shorter (5yr) fixed rate period given my planned exit.

Your thoughts? (besides "don't do it", which could be the lead case anyway) :-)