Seller financing

[Matthew Yrungaray]

Hello All,

I was wondering if anyone might direct me towards a resource that goes over how to structure and set up a seller carrying a portion of the purchase. The purchase will be a multi unit / apartments 30 unit. As long as the primary lender goes along with it, how does it work? what are the moving parts?

Thx

[David Beard]

@Matthew Yrungaray - note that the bank lender will expect the property to have a DSCR (NOI / P&I) of at least 1.25 (maybe 1.30) after factoring in both payments, so keep this at the forefront as you're haggling terms. You'll need a lengthy amortization period. And you sure don't want a balloon for at least 5 years, preferably 10, as you would be dependent on appreciation to bail you out with a refinance, or having to come up with the cash, not a good place to be. (Though truthfully the 2nd holder probably would not want to foreclose, and would likely negotiate an extension, but who knows?) And try to exclude any prepayment penalty, to keep your options as open as possible.

The bank will likely want you to have at least 10% of your funds in the deal (combined LTV <=90%), so a 75/15, or 70/20 on the LTV, may well be doable.