Multi family seller financing

[Dave B.]

Hoping I could get some quick help. I'm newer to REI and currently invested in SFR's as I've purchased 5 homes worth an avg. of 160k over the last two and a half years. A family friend brought a deal to me for a small 20 unit apartment building and I've started to play with the #'s, ran it through the deal calculator etc. Can someone shed some light on how most people traditionally structure seller financing deals for multi family? Having only purchased SFR's through a conventional mortgage I'm a little confused on the most common ways to structure commercial deals, especially those including seller financing. What are the typical downpayment terms, # of years, interest % etc? Any help is greatly appreciated! DB

[Bill Gulley]

No interest loans can be done, they can also get you in trouble if not presented properly, the seller will have imputed tax rates along with every payment being subject to taxes on the gains.

Think that can't be your problem? It is when you suggest it, you draft it all up, you provide the note and lead them through the slaughter house to close, then they find out later. 

Before someone else suggest it on this public forum, never pay more for a property due to seller financing, it does not add value to the property. 

No, not just anything can be done, commercial loans can still be predatory on the "Maker's" part, the Maker is the borrower. Seller financing is, can be, subject to usury laws, so check the state laws. This also plays on the seller's side. BTW, a 4-plex is a single family attached dwelling, not a multi-family. It might not be a commercial loan....careful.

While I doubt the owner of a 20 unit apartment building will be that naive, they could be, especially if they are up in their years, and if they are, more care needs to be taken in trying to be creative. 

30 year amortization and a 5 year balloon, at 100% financing?  You better make additional payments to principal because you won't be getting 25% in equity to refinance that puppy. Consider any forced appreciation carefully, are you going to bet you'll be in a position to meet that balloon payment? 

Additionally, your cost of money (cash available to you) needs to be lower than the rate you borrow at, it gets expensive when you don't have a down payment.  

Do read the note forums, consider the source of information, then if you do your deal, see an attorney. Good luck :)