VTB / Seller Financing / Vendor Financing of Deposits

[Michael Gouveia]

I've been visiting BP for 3 or so years now and have been very impressed with how the majority of my inquiries had already been addressed within other discussion boards or within the excellent blog posts.  What a great site and thank you to those in advance that offer their time experience with answering my questions below.

We wrote a deal yesterday for 32 units @ $3,000,000 and considering the fact the seller was open to a VTB wrote in 25% ($775,000 Interest only VTB) to see where it takes us. The deal cash flows well with a 6.75% CAP and 205,000.00 NOI and requires little to no work. To us this is a simple buy and hold play.

My main question to you all is, how the heck do I finance the remaining 75%?

1.  The broker that helped us with our last 2 apartment deals said we may be best to close this with a 2.8% 30 yr CMHC insured mortgage with 15% down and a 4.75% insurance fee amortized with the mortgage.  The numbers look good going this route and we do have the cash to close this deal this way.

2.  Roll with the 5 yr interest only VTB @3.5% and find another lender.  The broker said that CMHC will not allow VTB and that he has never closed a $0 down deal.  As I have seen on some of our past deals he speaks of a mortgage clause that restricts adding a second mortgage to title without approval in essence making the VTB unregistrable. 

As we are looking to break into a new market and add doors quickly, keeping our capital liquid as with the VTB seems like an obvious play however it also seems that financing the balance may make this play much more difficult. Is there a workaround to this? Can we put the deposits up and have him refund them after the deal to create the VTB, almost like a private LOC?

Any feedback is greatly appreciated!