Owner Financing

[Scott Bastarache]

I have an eight unit building in my area that is for sale. I have been told that the owner is very motivated and will entertain any creative financing. I have a few questions regarding owner financing.

1) Can owner financing be done if the current owner has a mortgage on the property?

2) Is there a way to mix owner financing with conventional financing and still keep out of pocket expense down to bare minimum?

The area of owner financing is very new to me. I realize that it is done all the time, I just have not had the oppotunity to close a deal with it yet and am very interested to get this deal done. Any info that can be shared is appreciated.

Thanks,

Scott

[Jon Holdman]

Well, people do various forums of owner financing on properties that still have notes on them. All of them do violate the due-on-sale clause and put you at risk of the loan being called.

Commercial loans, which would be the only thing a eight unit building would have, are sometimes assumable, with approval from the lender. If you can do that, and the owner is willing to carry a note for the remainder, you might do this with little cash out of pocket.

Some commercial lenders will allow a seller second. But they're still going to want some cash of your own in the deal. Something like a 70% first mortgage from a lender, a 15% seller second and 15% of your own cash might be possible.

The simplest is a lease/option. Master lease its called for commercial. You lease the entire building the sublease the apartments.

A wrap is possible, too. The seller creates a new mortgage and you pay on that. The existing mortgage is paid out of that payment. As LeJon points out, you would want to make one payment for the original mortgage and a second one for the difference to the owner.