Creative Financing on 4 unit is it doable/ worth it?

[Jacob Lapp]

Hey Everyone,

Bear with me this one’s a little complicated...

I’m currently on my second multifamily house hack and things are going great. I’m excited to keep building my portfolio and am getting impatient on waiting the full year to do my next deal.

I found a great property that has been listed 10 times in the last 12 years... (yikes I know)

It’s listed as a quad.

Single family house 3bed/1bath

Single family house 3bed/1bath

4 car garage with apartment on top 3bed/1bath

1 car garage with apartment on top 1bed/1bath

They are all next to each other and being sold together, but have 2 addresses/2 deeds. With that being said my lender told me I would need 2 mortgages.

The list price is 550k

The current rents are 4500 a month (using 1% rule, worth 450k)

If I got average market rent for each unit it would be 5800 a month in rent (using 1% rule, worth 580k)

All that being said I know with the eviction ban some rent is better than no rent. I don’t want to buy it for what it could be worth one day I want the numbers to work now but don’t want to rip off the seller.

I was planning on offering 480k and willing to go to 500k max. (I think thats fair but not the main point of this post)

Now the reason I assume it has not been sold is that it would be classified as a non-conforming property preventing a conventional mortgage.

My second issue, capital. If I were to somehow get approved for a conventional loan or 2 conventional loans at 20% down my down payment plus closing costs would put me around 120k.

I don’t have that in cash I’m comfortable with 35k down keeping a solid reserve.

I was hoping to either get the seller to finance the rest of the down payment 85k or a loan for the 85k.

I broke it down and if we structured it as a 10 year loan with a 7.3% interest rate I would pay $1000 a month on top of the $2600 ($1300 mortgage/insurance/taxes on each loan thats a high estimate) so $3600 total.

At current rent I would be cashflowing roughly $800 a month

At market rent cashflowing roughly 2100 a month

In 10 years at todays current market 3100 cashflow

I’ve spoken with a few different banks and mortgage brokers. The consensus I got was that I could not use borrowed money for my down payment.

The property is held free and clear by what looks like siblings who inherited the property.

My gut tells me to push for seller financing.

If you agree, how would you structure the seller financing for wins on both ends?

Would trying to make these funky bank loans make sense if I couldn’t obtain seller financing?

Would you pull out equity from else where to get this deal done?

Should I give it a rest and wait till my years up to do the next property?

Has anyone done a similar deal and how did it go?

If you’ve read this whole thing you’re a trooper and I appreciate you. I know it’s all over the place and is lacking info. But would appreciate any constructive criticism’s on my thoughts and input on how you might go about this.

Thanks in advance!