Possible 100% Seller Financing Commercial Deal

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Possible 100% Seller Financing Commercial Deal

Matt Taylor
Investor · Charleston, WV · Member since 2023 · 2 posts · 0 votes

Hello there y'all! I'm new to the forum and the BP website! I'm a business owner and my business is located in Charleston, WV. We are in a plaza and take up 2 units out of a possible 8. Occupancy is 6/8 typically and the rent rolls are $8,500 per month. 

The plaza is in need of about 100K in repairs and maintenance (none is essential though). I previously approached the seller and asked to purchase and he told me it would take a 2 million dollar offer. Clearly, that math doesn't work out. 

The seller is about 70 and he would be looking for something financed over 20 years likely. My question is...where do I start negotiations that isn't insulting? I did the math at a $750,000.00 offer over 20 years at 8% interest would be a ($6,273.00/mo) payment. We could use the monthly cash flow difference to invest into the improvements and look to BRRR over a long period (3-5 years perhaps?).

I'm open to any and all suggestions. 

Matt Tay

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  • Cliff BennerBusiness Member
    Accountant · Denver, CO · Member since 2020 · 392 posts · 183 votes
    3y

    @Matt Taylor Nice! the idea that he is interested is awesome!

    I suggest to look up Codie Sanchez and follow some of her advice.

    Couple questions and thoughts:

    1. How long do you want to hold it for? 20,30,50 years?

    2. I assume he thinks like a business owner so Math and Comparisons would be important when explaining your numbers vs his numbers.

    3. Why would he want to sell it? Does he want to make sure he can retire and live comfortably for the rest of his life? What is that amount monthly that he would need to live the life he wants, does he want his Kin to be paid as well?

    Knowing some of this, maybe you could talk him down on price but also focus more on that monthly payment for yourself, can you pay him $10k for 50 years with the note being passed on with his Will for generational wealth? Could you start with step up payments(I am doing this with my seller financed business deal) Where you start lower then increase payments every year for X Years? Maybe you do an agreed price but for no interest. Maybe its three years of Interest only at X% then principle payments only.

    Everything is negotiable and can be as customized as needed, seller finance is the Wild West.

    Maybe in the amount agreed upon, he supplies you with the cash to rehab it right away and the building too? If he has the cash and that might help make his price more realistic to you.

    I would say, find out why he wants to sell, what he will do after he sells, where he got that price. Questions like this will help you dive into how you can structure the terms. 

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  • Matt Taylor
    OP
    Investor · Charleston, WV · Member since 2023 · 2 posts · 0 votes
    3y

    1. I would love to buy and hold it for the forseeable future. 

    2. Yes, he owns the property free and clear. He is about 70 y/o and looking to sell some properties. 

    3. He wants to cash out some of his investments. He is interested in seller financing because of minimizing the tax implications. He owns a bunch of property around where we live (commercial). Not sure about the next of kin thing. 

    Great ideas on asking for some money over the asking price to do some improvements with and with generational wealth with possibly passing on the monthly income to his family after he is gone. 

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  • Cliff BennerBusiness Member
    Accountant · Denver, CO · Member since 2020 · 392 posts · 183 votes
    3y

    @Matt Taylor 

    Knowing some of that, a suggestion is to focus on the monthly price over the sale price. I think the saying goes, "you have the price and the terms, you control one". To me this means, If i can cash flow and want create generational wealth for my family(my goals with business) then monthly payments matter more to me then sale price. Using your circumstances; Id agree to $2mil, if I plan to hold it until i die, and I can make a good amount of cash flow after expenses and monthly payment forever. And if you agree to the price with no interest payments for however long you decide, then your return is increased with inflation. Plus, could you add the other things he wants to sell? Maybe you can bundle even more to make the price not as high as it seems!

    Just a few thoughts, cant wait to hear how this goes!

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