Early Days, Financing

When I first heard about this opportunity I discussed it with the banker.  I use a portfolio lender and have all of our properties and a line of credit through this community bank. We also financed our personal home through this bank so they really know our business. The banker is a totally on-board trusted team member and I count on him to help me process these kinds of opportunities.

Our original business plan involved buying X properties and we are one shy of X. Initially, Mr. Banker was concerned that we were leaping from 1X to 10X.  On the other hand, he's a banker so he liked the cash flow aspect.  However, he knew we had another deal for sale and wanted to see that sale go through before we took on 10X. If that happened, he could talk about financing the multi's.

Unfortunately, he had me thinking about total debt at that point and now I wasn't so sure it was a good idea.  Plus, all of my expertise is in SFH and it could be a game changer to switch at this late date.  

Press pause...

While paused, I found Bigger Pockets and our local REIA.  Both of those arenas gave access to knowledge about small multis. It started to feel like a real opportunity for success.

The idea of owner financing was hatched. Call banker.  Before I tell him the new thoughts of owner financing, he said "you know, I was talking to the chief lending officer and she thinks this is a good deal and we should reconsider, I think I could get it approved right now."  When I quit laughing, I asked him if we did owner financing for one year, would they support that deal.  Owner financing would allow us to start with 10% down instead of 20%.  That has a number of benefits, not least of which is freeing up cash to deal with deferred maintenance issues.  Then, once the properties are repaired and occupied, we can go to the bank and refinance conventional up to 80% LTV. Banker thinks this is a grand plan. Win Win.