How can I buy this deal?

[Cody Godfrey]

I’m looking at a duplex in the City of my hometown. It’s an off market deal I found for 75,000. The seller still has a mortgage owing the bank about 55,000.

I’m trying to be creative with coming up with financing options to purchase this house as I really don’t want to put 25% down to get into it. I was hoping to raise cash, pay the seller, lightly rehab the two units (they’re both already in good shape and wouldn’t take more than 3-4,000 each to make them higher end rentals in the area), raise rents (at least $100 too low per unit), and then refinance out in which I think the property would then be worth north of 100,000. If then pay off the initial investors and cash out and remaining equity for a new deal.

I’m a seasoned property manager and currently own a triplex so this would be my second personal deal but I manage 130+ units at my day job so I’m no noob.

How do I go about raising cash for this deal or, does anyone have any creative financing strategies other than 25% down?

Thanks in advance!

[Carl Millsap]

@Cody Godfrey There are a couple things you can do:

1. Owner financing. Negotiate your purchase price, interest rate, amortization schedule 15, 20, 30 years, and payment. Say $75k at 5.5% amortized over 30 years but has a 5 year or 10 year balloon. Payment would be $425 a month. 

Owner makes the payment to his bank and keeps the difference between your payment and what they pay, plus at the end of the 5 year or 10 years their net sales price will be higher because of the interest they collected over the years. You would be responsible for everything as if you had it mortgaged with a bank ie. insurance, maintenance, tenant management etc.

2. Subject to: Give the owner 5-10% down and take over their payments. Set-up a plan to pay them off in 2-3 years once renovations are complete and you can finance it at the ARV.