Can I do this?

[Eric Bilderback]

I would rather look dumb in a form on BP then face to face with others.  ("It is better to look dumb and have people assume your stupid the to open your month and remove all reasonable doubt." Abraham Lincoln I believe).  

Here is my deal.  I have a small apartment complex (15 units).  A guy lives there for free to manage it for me.  I want him to do more for his free rent (it is a gravy gig).  A 4 plex across the street popped up for 250k I called the realtor they are not firm.  Rents are 2100 and are under valued I think.  This would be perfect to along with the other property.  I am self employed and I need a big wad of cash to sit on to feel good so I am not willing to put must of my reserves for this as a down payment.  

Here is my question, a lady I have met in person through BP is willing to give me a loan if I put 5% down but wants an 8% return for herself.  I cannot find many properties to make this pencil.  This one would if I used her loan to me as a down payment of 30% or so.  Can I use her loan as a down payment and then borrow the rest from Quicken or whoever.  Or is this not kosher.  This sounds like how the financial crisis started, but I am very confident this will cashflow.  I read through many of these discussions and have not ran into anyone discussing this precise situation.  Would you guys fill me in?

Much appreciated,

[Jeff Rabinowitz]

If this were a sfh it is not likely that you would be approved for the mortgage if there is a second on it. I had a buyer recently who needed ~$15K beyond what he was approved for to purchase one of my houses. The house would have appraised for the purchase price and I would have gladly taken a second mortgage in second position to close this deal. The buyer's credit union would not do the deal. (I ended up selling this house to the same buyer on a land contract and they cashed me out with a new mortgage loan a year later.)

The second may be alright for a commercial loan. If it is not, you may be able to get a loan for the full amount needed to purchase the building (assuming you have the funds on hand for the down payment). After the building is purchased you could borrow your down payment out (minus the 5% the investor wishes you to keep in the deal) by giving the investor a second mortgage and a note. The investor would be in the same position as she would be in if the first mortgage company allowed a second mortgage at closing and you would have your wad of cash back.