Creative financing for 3-unit property - strategies?

[Nick Hundertmark]

Hey friends, I came across a 3-unit property in a decent part of Harrisburg City that I would love to own. The owner called after getting a piece of my mail. They are motivated to sell, but not motivated enough to sell for a discount that would make a wholesale possible. I like the apartment because it's been well cared for and produces good income. The owner is interested in an owner finance deal, but not for a large portion. They want to get a good chunk of cash out. He's entertaining the idea of a bank holding 1st lien and 80%, then he would take 10% and 2nd position. I would have to come up with the other 10% in that scenario. Im trying to think of other creative ways to minimize my cash investment. Any advice? -Nick

[Joe Villeneuve]

First, based on the way you just laid this out, it won't work.  Here's why.  It has to do with the timeline of each of the combined funds you are thinking of using:

1 - Cash...yours = 10% not a problem...assuming you have it.

2 - Seller financing (other half of DP) = 10%.  Assuming you can agree on terms, not a problem.

3 - Bank 1st lien = 80%.....oooops, big problem.  You already have a 1st lien, the seller's lien (#2).  The bank won't take a 2nd.  Most lenders (all that I know) won't let any of the DP be a loan anyway.

You can't get the bank loan without the DP, so this ends up being a "chicken/egg" scenario.