Milwaukee Purchase with Owner Financing

[Bob E.]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $92,000

SFR In Milwaukee with Seller Financing.

What made you interested in investing in this type of deal?

We were close to being debt free on this purchase and did not want to wait several years to stockpile cash for the next deal. My business partner is between jobs and I do not have a W2 income so It would have been tough to qualify for traditional financing in time to make this work but our LLC has a strong cashflow.

How did you find this deal and how did you negotiate it?

We came across this investment when our property manager contacted us after another deal fell through. It was one of two SFRs the seller had left and he wanted to sell both to one investor. We split the properties between two LLCs that we have based on cash and credit available. We have a great relationship with our PM (we try to be low maintenance) and she knows we close deals.

When we got the call from our PM/Realtor I asked about the seller and their plans.

How did you finance this deal?

When I was told that they were looking to exit the business I asked if they would consider seller financing.

Seller Financing. Since it was close to the end of the year we asked the seller if they wanted to close in December or January, they picked January to push the income into the next tax year and offered us two year financing at 5% with a balloon. Again, to help them manage there taxes we had the balloon on this property due in December of 2023 and the other property in Jan of 2024.

How did you add value to the deal?

By offering a large down payment we gave the seller assurance that we were serious and they were well secured. We worked with them to close to January to help them manage their income for the year. We also put the balloon payments in December and January of 2023/24, again to help them manage their taxes. We tried hard to make sure this deal worked for the seller. If it did not work for them it was not going to work for anyone.

What was the outcome?

We closed on schedule.

Lessons learned? Challenges?

We did bring in two private lenders to balance out the cash purchase, creating a 3 1/2 and 7 year note for two other properties we own free and clear. One of them came down with COVID so we used our Line of Credit for gap financing to keep the closing on schedule.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

@Melanie Eden