All Forum Posts by: Drew Slew

Thanks for all the input. Price is ~1M, im putting 40% down, mortgage bank gave me 6.62% and seller is offering 5.75%. No debt, they bought this place for like 200k in early 90s, quite old people. im not sure if they will be alive for the 7yr term but they chose it..

The reason im putting so much down is im buying w gift money and i want low monthly payments. Mortgage PITI would be around 5300/m total w insurance, seller financing is around 3600/m w principal, 3100/m with just interest. Im def going to pay principal

Biggest q i still dont really understand is:

- what happens if i refinance before 7yr term or sell

- at year 7, can i extend balloon or not

- at year 7 if value appreciated a lot, can i do a HELOC on it and use that HELOC to pay off the balloon - probably not due to lien being secondary etc on heloc

Thanks yes makes sense they were transaparent about having less tax with it. Its also good to have 1%+ less rate but the whole baloon payment makes no sense. Id like to put a HELOC on it or redelop it after a few years, the whole points of purchase is this is a booming downtown area lot of development rights etc, dont want to be in a financial structure that banks will frown upon.

I also want to make sure w seller financing there is an online dashboard i can log in at escrow or title company to track the loan paydown and monthly payments like w any mortgage bank.. did not see that on forums. Def dont want some manual emailt tracking from their attorney, would be super basic.

Told them id be putting principal payments in it here and there, so want to make sure that is all included, just interest only is not that good. 

I got 800+ credit and great mortgage offers so only reason im doing this seller financing idea is that its lower monthly cost

Quick question on those who have done seller financing:

- Buying a 0.3 acre downtown fort lauderdale multi family, negotiated an around 1M price w lot of development rights, double lot. seller got it way back early 90s for pennies

- got good credit 800+, w2 job etc put 40% down and mortgage bank offered 6.62% 30yr fixed (CF negative as this would make current rent roll not too much compared to the PITI)

- property is in ok condition, needs 20-30k repairs which seller OKd, and all 3 tenants are month to month, pay bit under market but also ok

- seller would like to do seller financing, interest only at 5.75%, 30yr amortization at 7yr balloon (CF would be positive) - id be paying some principal as well, just to grow some equity

- buying this deal for the future development of the area (las olas, kushner broward crossing) so not really worried even if we overpay for it now, but never done creative finance as i always relied on a strong W2 job to get good loans but obv im used to 3% 30yr rates from covid times not this 6+ environment..

Goal is to hold the property 3-5yrs, and then actually develop it or sell half the land / refinance, pull out HELOC if it appreciates.

Questions:

1) What does he know that i dont? Trying to make sure seller isnt pushing this seller financing without us knowing something they do. Overall we both would win it seems quite big, esp w interest only the cashflow would be positive. he didnt really like we are doing an appraisal as he might be thinking he can pull a fast one on us w his price tag.. again happy to overpay as i see the potential but obv not outrageously. 

2) Can principal be payed down in interest only seller financing? even if its interest only, id want to pay down principal here and there. seems like sellers would offer this interest only route so they have 0 capital gains tax, but id rather pay down a bit of principal in 7yrs. i see its not required but it should allow for principal paydown in promissary note

3) any general advice to look out for on seller financing?

Thanks any input

what would you think of a 14,600sqft 3 unit property in sailboat bend, off market, that is RMM25 zoned and has a nice single family and duplex behind it, half of the lot if empty so it can be developed or RV/trailer parking, for $1.1M? looking to make an offer

thanks good idea!

Interesting in hearing feedback and pricing comparables to an off market potential deal where I have met the owner who is willing to sell his 3 units building (SFH with 2/2 and behind it an ADU with 2 other 1bed units and 2 car garage). Location seems quite good close to Espianade park.

Current rents and building quality needs work, total rent income is around 5k/month, parcel is quite big 14k sqft. Indicative price around $1.1M, which would be a loss, with tax around 2% potentially 20k/year. Value adds that could bring up cashflow/value:

- renovating units to bring rent up to 6-7k/month 

- ability to rent out parking space on the property as lot is large - trailers, parking, RVs etc - about 1-2k/month cashflow. 

- property had TDR trasnferable development rights and can be built 5 stories on it. I wouldnt develop anything but sitting on it could be worth waiting to one day add new units/condos or a larger multifamily partnering with a developer. 

- half of parcel can also be sold off as only one half has the SFH and ADU on it

Owner is quite firm on the price. Even though it doesnt cashflow well asap, the potential would be its proximity to Las Olas, downtown and the size of the lot, different development options. 

Looking to hear any ideas, how one would tackle this opportunity or what would you do other than raising rents slowly and sitting on it to refi or wait on appreciation. Thanks for any input

Thanks for all the help and info on this thread, my 2family sold May 29, at asking price 659k. I did move out price as I initially thought psychological 649k would be better, because I realized that with 1 unit vacant (1 tenant paying low $1850/m in first floor unit) i either get homeowners buying or investors who will lowball. 

Biggest issue is the tax, its much higher than anticipated 50k as w depreciation recapture is 81k after i paid 5800 transfer tax at closing.. so thats a BIG problem and i want to make sure i pay minimum on that - use 10-20k upgrades i put in prior to selling, max out LLC this year to write all expenses off from it etc.

- Any advice on how to offset that 80k tax? Also my CPA says it needs to be paid by 6/15 which im definitely not doing, way too early. Only paying tax next year April 2025

Learnings that might be valuable to the BP community:

- summary highlight reel of returns https://www.facebook.com/reel/463607949581515 (bought for 395k, 3.75% 30yr fix, took 60k heloc out, cash flowed ok, water bill usually $3-600/m so bad etc) Put on new roof 19k, upgraded w new paint, vanity, boilers 10k prior to selling in April.

- buyer was NACA 0% down, and they will occupy 1st floor unit, got lucky as they fit well into neighborhood and love the house. NACA is VERY slow, they did 2x appraisal and 2x inspection, asked to upgrade a bunch of stuff like random hand rails on 2nd floor stairs etc

- marketing helped with digital floorplans, 3d tour > only held 1 open house and didnt receive that many offers.. surprising. Most investor offers were lowball 500-550k and not professional, some never came to see the place so outright wouldnt consider them. 

Overall this area is definitely going to keep going up, but it was time to move on from this investment and find others in CT/FL as more assets as there now. This area Ocean ave/Wilkinson ave around the elementary school in Jersey City will keep going up due to new highrises and condos around it and 20mins proximity to NYC, could well be 850k in the next 3-5yrs. 

In terms of taxes, this is what I got from my CPA< but i dont think its still right, seems VERY high. Not seeing the 1% exit tax for NJ and all the closing costs too. so it would be around 100k total to just sell a place with 340k-ish profit. cant be

Selling price: 649,000

Purchased: 395,000, loan outstanding: 285,000

TAX:

Federal; $64,000

NJ: $20,000

Federal tax breakdown:

Cost basis: $395,000

Proceeds: $649,000

Depreciation Recapture: $56,000

Net taxable gain: $310,000

Federal Tax Breakdown:

Depreciation Recapture taxed at 25%: $14,000

Gain from sale taxed at 15%: $38,100

Net investment income tax of 3.8%: $11,500

great neighborhood obv 3yrs went by since the OP, but now the avg price is 585k in the neighb, i got a 2fam around Ocean ave and Bidwell around high 300s in 2018, planning to sell next month for mid 600s. 

As i see driving down from north, you have insane highrise growth at Journal sq, all the downtown JC area is filled up w luxury condos and the bergen lafayette area around 74 also filling up w lux condos. Theres a few bigger developments now done as you drive down on Ocean ave, so money has come down. Idk if OP bought anything 3yrs ago (when mortgagees were in low 3s) but since then a lot has changed. I guess the area is still "up and coming" but you get 2fams now in the 1M pricerange so idk who would call that up and coming at this point pricewise.

@Shawn Mcenteer sounds good thanks a lot Shawn, lets PM here