All Forum Posts by: Heeyeon Chung

@Heeyeon Chung Being that seller financing is very negotiable, I would negotiate whatever terms help the deal make sense. I'd probably aim for somewhere between 70% LTV and 100% LTV with a 6% interest rate because that's what many sellers seem to be accepting right now (but if you can get it lower, so be it). You'll probably get anywhere from a 2-5 year term with seller financing. Push for as long as possible in case it takes longer than expected to legally convert the property from motel to multifamily. Some sellers will also give you interest-only payments throughout the term and others will give you a balloon payment with no payments due for some or all of the loan term.

@Heeyeon Chung are you saying that the broker/owner will not even provide a rent roll and which units are vacant?  It depends on the lender what they require from you.  I have taken out a lot of commercial loans where the only thing I have provided the bank are my PFS, tax returns and a rent roll. 

You will, however, want to understand which tenants are currently in leases and which are month to month.  You do not want to be on the hook for long term leases with weird terms/low rents.  Are they refusing to provide those as well?

@Heeyeon Chung Being zoned for use as a motel and operated as a multifamily property will probably make it challenging to obtain conventional financing, with or without existing financials.  Have you spoken with a bank and explained that aspect to them?  I can't imagine any banks being excited to finance that.  Your best bet is probably negotiating a seller finance deal with the seller.  If she's refusing to provide financials and if you can't obtain conventional financing because she's operating the property illegally, then your options are likely buying it with cash and refinancing it after everything is in better order or using creative finance (like seller financing).

Assume everything they said about income is wrong. You may need to evict 12 of the 14 tenants and you bear the burden. Add this into your costs. Were you able to walk into all 14 units? If no, they are a mess and major rehab needed.

You can inspect the roof with drone, walk around all the perimeter, get the utility bills, ask tenants and neighbors questions. 

If you are only buying to redevelop or tear down then your real questions are: what does the planning department say about your site plan and battle to get a zoning hearing; how long from day architect has plans will you manage as is (my guess two years); what are carry costs; what will cost be to do what you plan; hoping you have a construction loan and having a written commitment are two centuries apart.

@Heeyeon Chung Are you planning to use conventional bank financing?  Some banks might be flexible and willing to underwrite the loan based on your pro forma.  You can definitely find bridge financing that would finance it without existing financials, but most of that is going to be very expensive right now.

@Heeyeon Chung

We provide an estimate of what we think they are adjust the price accordingly.

@Heeyeon Chung You can't force the seller to provide the financials.  If she doesn't and they're important to you, then your only real option is to terminate the contract.  If you're confident in the future value of the property and believe that you know the area well enough, then the seller's financials might not mean that much to you.  In that case, your option is to forge ahead using your knowledge and expertise to move forward with the information that you do have.

Sometimes in situations like this, you will not get all the details. Especially smaller multifamilies. Sometimes you have to make decisions based on your proforma, utility expenses, and price you are getting at. If they were supposed to give you all these details based on contract, maybe re-negotiate price and speak to your attorney about lease estoppels. 

 @Heeyeon Chung  no problem.

So, since you already have some RE experience, you'd be happy living there long-term, and it's not critical for you to be able to refi at a certain time, that all makes it sound a lot more appealing...

One other consideration:

Is the layout of the house set up in a way that allows you to rehab certain parts of the house without having a major impact on your quality of life?  For instance, I did a live-in rehab on a house that had many bathrooms, so even while I was rehabbing one bathroom, I could still easily use the others...also, the house was very  large, and had two wings that were pretty well separated--it allowed me to mostly live in one wing of the house while rehabbing the other wing... also, this made it so that whenever I had subs working on the house, I had a whole separate wing that I could go to--I rarely had subs working in my living space... And, the best part: the house had a mother in law apartment with its own kitchen, so while I was rehabbing the main kitchen, I could use the mother in law kitchen!

In other words; the spaces where the work was happening were not usually the spaces where I was living--and that made the process WAY more tolerable.  On the other hand, if a house only had one bathroom (that had to be rehabbed), and/or if it was set up in a way where you were constantly living directly in your work zone, then that could make it a lot less tolerable... 

Of course, all this stuff also depends on how tolerant you are of living in or near a work zone--some people don't mind doing that, and others (probably most) really don't like it....

Good luck out there!