Creative Financing Suggestions Needed!

[Rachel Nunes]

Hey all!
I've recently targeted a mixed use property that I think would be a perfect first investment property for my husband and myself. The property is listed at 455k, and is comprised of a first floor retail space, with the upper two floors being a residential condo. The lower space is currently rented for $1850/month, through March of 2017. I'm told the tenant has no plans to vacate, and would like to continue to lease the space indefinitely. The condo portion is vacant at the moment, but given the market for Air BnBs in this area, and the particular location of this property (5 minutes to downtown nightlife, 10-15 to the beach, and walkable to a variety of shops and restaurants), I think it's a perfect candidate for short term rentals. Based on short term rental comps in the area, $225-$250/night would be the sweet spot, and there is, oddly enough, not really an 'off season' here, so vacancy is hard to come by. Alternatively, I could rent the unit long term. Comps put market rent at around $1850/month. Using a conservative 20% vacancy rate, and managing it myself the property would cashflow at somewhere around 4500/month. All things considered, it's a GREAT deal. (*note: I do also have a 35k line of credit available for things like setup/furnishing/operating capital-- I just can't use it for a down payment)

But (there's always a but, isn't there?)...

I am closing this week on a house for personal use. My cash reserve is tied up there at the moment, which means I can't do traditional financing with a 100k+ down payment for an investment property. I have offered (and been turned down for) a lease option, even countering with above asking to see if I could entice the owners. No dice. After the closing on the house later this week, we should have no problem qualifying for traditional financing, but the down payment issue will persist. I had an opportunity for a private money lender for the down payment, but ultimately, he wasn't comfortable in second position. I have an excellent BP member/realtor/investor working to help me bring this deal together, but between us, we're out of ideas. Do I have any options we haven't considered? I can't bring myself to walk away from this one! 

[Steve Vaughan]

May be a blessing in disguise I think.

How long has this been on the market? MLS stuff often doesn't make sense and is rarely the best way to find motivated sellers. We need problems to solve. Doesn't sound like this seller has a problem.

We have to offer on current financials.  It is bringing in $1850 a month. PP of $450k.  Ouch.  Does the condo need work?  Why is it vacant?  

Ok - maybe run the analysis as if the condo is occupied for it's normal purpose, at $1850.  To me that's still a stretch.  That's offering on a pro-forma there even. To assume the condo will all the sudden bring in $6k/mo with only 20% vacancy reminds me of a few years ago.  In the GRC.   

I bet by the time you put your DP together the property will have seasoned on the market a while and the sellers will have discounted the price.  I like your creative thinking, but the numbers are the numbers.  Congrats on your new primary @Rachel Nunes!