Hard/Private Money + Seller Financing for Apartment Complexes

[Alex Olmer]

Hey everyone!

Brand new to BP and REI in general. Excited to be here :)

Looking into creative financing for apartment complexes (30+ units).

Forgive my "noob-ish" curiosity, just trying to explore possible options!

Example scenario:

• Seller is selling 30 units for $1,500,000
• Seller is open to seller financing with 20% down payment (interest only + balloon,18-24 months)
• Hard/private money lender provides 20% down payment + funds for repairs (interest only + balloon,18-24 months)
• After a 12-18 month seasoning period, the buyer refinances with a local bank (portfolio) and repays the lender/seller 

The last step is made possible because in this example scenario the property appreciated through value add/market fundamentals, the buyer accrued 12-18 months of cash flow, the NOI increased (raised rents, etc) and the expenses decreased (sub metered utilities, etc).

Am I missing something? Is a scenario like this possible or am I crazy?

I have a feeling it's the latter but it'd be nice to hear from people with expertise on the topic(s).

Thanks and look forward to hearing your thoughts!

[Tom S.]

@Alex Olmer Welcome to BP! HML will require 1st position, so seller would have to be 2nd position. It is highly unlikely the seller will finance 80% of the purchase in a 2nd position mortgage.