Creative Deal Structure on Quad

[Mattias Clymer]

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $700,000
Cash invested: $30,000

The most creative deal I've put together with owner financing, low down payment, and high debt pay off.

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

This was a true win-win-win type deal. The owner did well, my parents were able to downsize, and I was able to get a new investment property for minimum money down.

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

The owner is an old family friend and he wanted me to take over the property.

How did you finance this deal?

My parents bought their unit in cash, I supplemented $30k and the rest was owner financed.

How did you add value to the deal?

We haven't done much to add value to the deal yet. Its pretty turn key. We plan on slowly bringing rents up until a tenant moves out and then we can get true market rent.

What was the outcome?

This is a great long term assets with many complicated possible scenarios. It is technically two duplexes. So, the owner placed a note for 61% of the home on one of the duplexes. The other duplex was bought in cash at 39% of the total value. My parents wanted to downsize and love the unit/area. They don't want a payment or to have anything to do with the rentals. This allowed the owner to get the cash he wanted and for me to only put a small portion of it down.

Lessons learned? Challenges?

Structuring the deal was a challenge. The note balloons in 7 years and the owner may renew. If he doesn't I wanted to be able to easily refinance the deal. So, I did a 20 year am. My parents are older and if something happens that I need to buy them out, I can refinance the one duplex that doesn't have a note on it. If in 7 years they want out and the note comes due, I should be in a position to not need to add extra money to keep the deal.