Owner Finance Question For Multifamily

[Eric Lindsey]

Hello, BP community,

I am interested in learning about owner finance underwriting. Currently, I'm evaluating a property where the owner initiated a loan two years ago. My question is: How much equity should an owner possess in a property to make an owner-financed deal both feasible and beneficial?

Could anyone provide a mathematical breakdown or offer an example analysis on this matter? I would particularly value insights on:

Good Opportunities and Bad Opportunities Based On:

• The influence of the seller's equity on the deal's terms
• Down payment.
• Interest rate.
• Amortization.
• Balloon payment.

Thank you in advance.

[Eric Lindsey]

Quote from @Cole Booth:

Regarding owner financing in relation to creative real estate financing, an option is to combine private capital and owner financing to secure the highest leverage possible on the purchase of a property. For instance, it is possible to secure a DSCR loan for 60% and have the seller hold an additional 30%, which, would give you the highest possible LTC for any DSCR loan on the market. Any combination of the two is possible and can be advantageous in an attempt to spend minimal capital out of pocket.

@Cole Booth 

Your combination of private capital and owner financing as a strategy for optimizing leverage in real estate purchases are great strategies. The idea of pairing a DSCR loan with additional seller financing to maximize LTC is particularly compelling. This could pave the way for acquiring property with minimal initial capital. Thank you for highlighting these creative financing techniques.