All Forum Posts by: Adam Boonzaayer

@Tom S.

Wouldn't I have to refi at some point to pay off the seller though? (In this case the seller is 80 and doesn't want to finance for longer than 5 years. I wouldn't cash flow with a 5 year term on 70k with no balloon, not to mention interest if he asks for it)

Does the bank know that the selling is coming in after?

What kind of terms are you getting with a loan like this that includes rehab? Higher rate?

Did you do these deals as buy and hold?

Thanks for the input!

@Tom S.

Thanks for the reply

It would be 5-6k per unit in rehab, 50-60k total. 

Also, at least for the 6 unit, I would be increasing the NOI by bringing rent up to market, this new cap rate valuation will have at least 20% equity

In the case of the 4 unit, I might have to bring some cash to a refi..

Unless a bank would be willing to lend on the 10 units combined? Does that happen?

Do you have any experience using a HML and seller financing?

Looking for advice on a hard money lender who will accept seller financing as a down payment.

I'm talking to a seller who is willing to finance around 40% of the purchase price of two properties, 6 unit and 4 unit. Each unit needs 5-6k in cosmetic rehab. 

Does anyone have experience with a HML who has financed a deal like this? Ideally I'd like to 100% finance(seller financing + hard money) the purchase and rehab then refi to conventional using equity for that DP. I do have 70k on hand but I'd like to put in as little as possible

Will I be able to get a loan for both properties or will it have to be separate since one is commercial?

Any other 0 (or near to) down strategies are welcome as well

@Mitch Messer

The owner had the property listed for sale earlier this year for 42k. He works for the State of Michigan as the head of the parole office or something like that, and is retiring in Brown County in a custom cabin they are building. Money isn't an issue for this guy. They bought the property to "give back to the lower class."

I guess I was assuming that a landlord would see this as an opportunity for an pretty decent cash on cash return for the first 3 years, then finance it through a bank. They will most likely have to bring cash to the refi but at that point with the proven income I would think they wouldn't have an issue getting a loan.

Purchase for 35k (31 + my fee)

Initial cash outlay say 14k (repairs + closing costs+ fee)

Conventional financing 20% down loan at 40k value, they buyer would have 20% of free equity to act as DP.

With conservative #'s it would cash flow $2700/year giving a cash on cash return of 18%

I guess I figured that was pretty decent, or am I still missing something

@Mitch Messer

Thanks for the reply.

I forgot to mention that the seller said he would bring cash in to the deal. And obviously he will have to to pay off the underlying note when the buyer makes the balloon payment. 

I'm not sure where you got that the property is worth only 20-30K, based on comps I value it around 40-45K. You don't think that this deal would appeal to a landlord who is interested in immediate cash flow for a low down payment?

Hey everybody,

Here's what's going on: I have a motivated seller who has agreed to seller finance a duplex they own (not owner occupied). Terms of financing are:

Purchase Price: $31,500 

Down Payment: $1,575 

Monthly Interest Only payments of $149.63 for 36 months

Balloon of $29,925 due in 3 years

(Side note: is a good deal for a buyer? Rents are $450 and $475, I think market would support $500. Tenant pays all utilities except water/sewer/trash which is about $70/mo for both. Needs about 8k in exterior repairs. ARV about 40-45k)

BUT the seller has a mortgage balance of 36k

Bought it 11 years ago for 48k

Interest rate on the note is about 7%

Since the purchase price is less than the mtg amount what is the best way to structure the financing for the buyer? Since I'm going to take a wholesale fee conventional is out right? Is subject to still an option? Land contract? 

What would you do??

@Brian Garrett What do investors typically do after the balloon period then? Refi again?

Awesome info from a ton of people! Thanks everybody!

@Gary Barella @Josh Collins I know I have been/am being overly cautious and should dive right in, but I made this post so that I could figure out the right strategy (foundation if you will) for my investing future. I know mistakes will be made but I'd like to avoid the big ones that would set me back substantially in the future. I want to create a sustainable system that will allow me to repeat successes predictably (or as much as possible). I just looked at a triplex this morning with value add potential for 2 addional unit in the basement (although I will purchase on the #'s from the 3 existing units), and I am looking at 2 other properties tomorrow.

@Todd Dexheimer Excellent advice sir, and my paradigm is a-shifting that's for sure. Over the last couple days as I've been analyzing deals I've asked myself more than once "what do I actually want out of these deals?" At first what I looking for primarily was $100/door cashflow and seller financing, but now I'm far more interested in finding deals at that I can purchase/rehab for 70% of value so that I can refi and take all my cash back out. Thus cashflow doesn't matter as much since I will not be limited (at least by available cash) on the number of deals I can do in the near future, although I'm still shooting for $100+ in cashflow.

@Patrick Soukup Out of this entire discussion the one thing you chose to dissect was my choice of idiom? I hope you don't do the same with others, it's not very helpful.. 

@Daryl Winters Nice first post! Haha and some good advice. We have been thinking more about getting one single family to live in, not sure how it would be living with tenants we enjoy our privacy.. So a 203K loan may be an avenue we consider if we can find the right deal. I have been looking for rents around the 2% of purchase range.

@Bob Floss II Words to live by from the afro artist himself!

@Dustin Lauer That is awesome to hear! When you say long term refinancing what exactly do you mean? And I know, everything is going to be bank specific.. But I would like to set my expectations now so that when I do reach out to banks I can ask for what I know to be reasonable, instead of going in and asking "what can I get?" I can go in and say "this is what I want." After all, they are in the business of lending right?

Another reason that I want to get as many properties as I can right now is because, as we all know, mortgage interest rates are on the rise.. Ideally I'd like to buy with cash&hard money, then refi to a fixed rate 30 year loan with no balloon. Or does that not happen with investment properties?

@Vandetta B. as far as the "LLC portfolio" goes are you referring to the strategy I linked to in my original post? For myself in particular I don't have any 1099 income to use to as a qualifier for a loan. And I'm not sure what length of 1099 income banks like to see for a conventional loan, I think 2 years though? Someone correct me if I'm wrong.