Updated over 6 years ago on . Most recent reply
0% Down or Conventional Financing
Hi all... I have an 8 unit building that i am evaluating. I have a few financing options to entertain and i would like you feedback. I don’t want you to focus too much on the details of the income/expenses (imagine that the due diligence and analysis is perfect) but rather focus on the end results that the financing produces.
Sale price $500,000
1.
1st position bank financing (6%)
2nd position seller financing (8%) down payment and closing costs
Invest $60k (out of pocket) in value add construction
= -$600 per month in negative cash flow in year 1
= -$200 per month in negative cash flow in year 2
2.
Conventional financing
Invest $150k (out of pocket) for down payment and closing costs
Invest $60k (out of pocket) in value add construction
= +$700 per month in positive cash flow in year 1
= +$1100 per month in positive cash flow in year 2
3.
Syndicate and raise the money and give up 6-8% and 70/30 equity split
Invest $60k (out of pocket) in value add construction
= -$600 per month in negative cash flow in year 1
= -$200 per month in negative cash flow in year 2