Seller finance with balloon then commercial loan

[Kerriann Lowers]

Hi there!

I have not done a creative financing deal and am curious if this creative financing solution is even feasible.

Background - this is a 7 unit off market apt complex. The owner is open to a discussion on selling but expressed that he’d prefer a larger cash payment “off the books” so he could avoid the large capital gains taxes. In my understanding, it's his responsibility to declare that income, so more of a him issue regarding legality and not mine. (Please correct me if I'm wrong on that because I don't want to do anything illegal!)

But regardless, for example purposes, say he was willing to accept $550,000 as a purchase price. I was told commercial loans can be 25-30% required for down payment, so I would need a little more time to save a portion of that cash.

If I pay him $100,000 cash and seller finance the remainder of $450,000 with a 3 year balloon then obtain a commercial loan at the end of the balloon, will the ownership technically be in my name at that point and I can obtain a mortgage for 75-70% of the property value? I’m thinking I would only have to put down whatever the difference would be from what I’ve already paid into the house and the total 25-30% down payment of the assessed value for the bank.

I’m also not sure if it’s possible just to obtain a loan for that amount (like a portion of the whole value of the property). Or would I need a loan for entire $550,000 and have the cash for the down payment up front (which I would have already paid a large portion of to the seller)?

Sorry if this question is confusing, but I'm super confused and trying to get my thoughts written out as clearly as possible. Any help or suggestion would be greatly appreciated!!!