All Forum Posts by: Chris Oswald

Thanks again @Brie Schmidt and thank you for reiterating the importance of keeping the end in mind. I know the seller will finance the short term, I just need to know that next step and what all of the possibilities are.

Enjoy the rest of you weekend.

@Brie Schmidt There are 2 properties, one an 8-plex and the other a duplex.  

Is there the possibility of just bundling both properties into one loan, or is this something which would not be best long term?

Would it be advantageous then to see if the seller would finance for 2-3 years, prior to refinancing?

I already have a call set with the commercial lender at my bank for Monday to work through exactly what they would need from me, how they would value the properties, and the type of loan structure they would be offering.

Thanks again.

@Jeremy S. Thanks for the insight. Being able to refi is definitely a concern of mine.  I was hoping to be able to purchase at a price which would provide instant equity based on a bank valuation and then use the cash flow, which at the most conservative estimates I can make would be about $1900/m, to cover additional costs at closing.

I definitely understand the bank will view the financing of the 8-plex and duplex differently.

I am hoping to structure a deal with the seller which creates a bit of flexibility on when I would need to refinance. I do know that he is attempting to transfer the note for property in Florida when he moves.  Hoping for some guidance at a high level of how I should structure an offer with seller financing terms to ensure we are all happy.

@Steve B. Thanks Steve. I don't need to buy as a package, but like the 8-plex and duplex a lot.  If it is the deal I think it is, I would hate to walk away without working through every option of financing the deal.  You are right, with a bit of time I could definitely just sell the properties if things weren't quite working out.

@Brie Schmidt thanks for pointing me towards that resource.  I understand the options, I guess my question was reaching out to see if I am going in the right direction with this or if I am totally off.

@Brie Schmidt Thanks for the clarification on how the commercial loan works.

I plan to purchase the property at value based on a cap rate of 8.5%.  When researching the current market rates they are closer to 6-6.5%.  This would give me the difference.  I am under the assumption that the bank would base the necessity of down payment for a new loan on purchase price, while a refinance would be based on current value.  I am very new to this, so please let me know if I am wrong.

Another consideration would be partial seller financing with the rest being financed with a bank loan.  My question is, how much would the bank ask of me in cash if the seller were to finance 50% or more of overall deal?

I am here for unadulterated guidance and with this great opportunity there is also risk.  I just want to make sure I am doing it correctly to mitigate as much risk as possible as this step if done properly would be a great step. 

I am starting to very seriously discuss my first deal and I want to make sure I am not getting into a bad deal or over my head. Was looking to start with a fix and flip and use returns for a down payment on a multifamily unit, but I was recently contacted by a seller looking to get rid of a a couple properties totaling 10 doors. Needless to say, this is much more than I was planning to start with and don't have the finances for the $140,000 up front costs.

The seller has offered to provide financing, but I'm yet unsure if they are willing to carry the entire note, but does want the freedom to transfer the note to another party.  I am looking for some guidance on how to structure the deal as I would like to refinance within a year to a conventional 30 year commercial mortgage.  

My current thoughts are:

1. Seller financing - 30 year at 5% - refinance when available, if necessary

2. Seller financing - 7% interest only for 12 months and then refinance

Is this (1) feasible and (2) realistic in terms of numbers.  

3. What options exist if they are only willing to do partial seller financing - will a bank loan money for the rest with no money out of my pocket?

4. Is it realistic to think the bank will refinance after 1 year.

Just looking for some mentoring for someone new to this, but quick to learn and I would be eternally grateful.

So I apologize in advance, this might get a bit long.

Real estate has been something that I have always wanted to invest in. My wife and I still own our first townhome and have been renting in for the last 4 years, but I really don't have much other experience. About a month ago I started to do my research and learn as much as I can about the plentiful options which exist in the world of real estate investing. Being someone who doesn't like to sit on the sidelines I made the decision that I was going to make a real go at it. 

Signed up for a PRO account about a week ago, put out a couple craigslist ads expressing my interest in buying homes, and started looking for deals. My goal was to start small, find a great deal, which I quickly realized are everywhere when you start to look, fix and flip and with the profit purchase a small multifamily rental. Creative financing was going to be my friend and I had my plan, I even found a great property, likely being taken due to tax delinquency in the next 7 months, perfect time for a potential great deal.

As I was writing my first letter to the owner a wrench was thrown into my plans as I got a call from someone looking to sell a package of 4 properties, all fully rented. 2 are single family homes, a duplex and an 8-plex. 

I'm not really interested in the SFHs, but the duplex and 8-plex are interesting, so we get to talking. Well, the purchase prices would likely put both properties in the 1.2% to 1.4% range, with cap rates slightly higher than 8% or more.

Unfortunately I am not in a place financially to come up with the cash for a bank financed sale, but from my look at the numbers the deal does look promising.

Here comes the part I never expected.  I knew I didn't have, nor would be able to come up with the money, so I let the seller know the deal was much larger than I was prepared for and he noted he would be willing to provide seller financing, but would like the option to be able to transfer the note. (At this time I am unsure if he is willing to carry all or just a portion of the financing)

My goal with this is to achieve seller financing for the entire deal and as quickly as possible refinance into a traditional commercial loan.

I am hoping for some guidance through this deal as it came much faster and larger than I thought, but I don't want to walk away if it is good.  Also I definitely don't want to get into it if it isn't good or is over my head.

My immediate questions are if my plan is feasible and how a bank would value the properties when I choose to refinance. I could also use some help in how to properly structure the deal at the start.

There is plenty that I don't even know to consider at this point, so highlighting things I have missed would be great.

If anyone is looking to provide some mentoring I would be beyond grateful. Thank you already for all of the great content you share and I wish you all the best.

Chris

@Kyle Soderman I live in Stillwater, so that will likely be the center of my efforts, but anything in the East Metro area into Western Wisconsin would be of interest.

Thanks @Account Closed, completely agree that some can be merged and I like the insights of how. 

I like things in the smallest pieces and building from there.  Long term would love to have enough business to warrant a person for each role.  Did I miss anything, or does that pretty much cover it?

I am just starting out with real estate, but in any business venture I always start with the end in mind, so I want to understand all of the different necessary roles to build out a great system which can be scaled for a primary fix and flip business. I do understand that I will wear several of the hats starting out, but if I can compartmentalize and provide clear definition of the roles, work will be much easier to hand off as growth dictates.

The roles I see being important to fulfill are as follows:

• Real Estate Agent
• Contractor
• Project manager
• Home inspector - for before finalizing offers
• Title company
• Marketer to find deals
• Negotiator to close deals
• Bookkeeper
• Accountant
• Lender/financial source

I know that I am missing things here, so any insight would be appreciated.

Thanks for the help!