All Forum Posts by: Garrett H.

Arman,

Thank you so much for responding with your thorough analysis. I had another recommendation that we purchase the property at $300k down and then make interest only payments for 3 years to the seller so that we could obtain title immediately, then by year 3 we can hopefully refi. I wasn’t clear with this strategy tho if the seller would have to own the property outright or they could still do it if they have an existing mortgage on it? Let me know if you have any suggestions there. 

The commercial bridge loan sounds like an interesting product. I’m not familiar with that and will research that. Thank you again for all of the help. 

Hi Jaycee,

We were hoping to secure the property with creative financing now since we don’t have enough capital to outright purchase it with a loan, while keeping our monthly payments lower than a mtg. I agree that the down payment and monthly doesn’t feel like the best route, hence my inquiry on here to get better suggestions. Rob proposed an alternative here that definitely seems like a better approach than what we put forth. 

Thank you for the suggestions on the USDA and SBA 7a for lending.

We have not organized a formal proforma yet, just discussed various revenue projections and expenses. Would this be most beneficial to present to lenders when trying to qualify, or are you stating that it would just be good for all of us to have all the number crunching written down?

Rob,

Also in the event that they have a mortgage on the property, they would still be able to transfer title? Or would this only work if they had it completely paid off? 

Hey Rob,

Thank you for the response and that actually makes a lot more sense than our initial proposed plan. Having the Title of course would relieve a lot of concern. What type of stipulations would we have to lay out for the seller if for any reason we couldn’t secure financing to make that balloon payment after year 3? Would we have to write it up to where they could reclaim the property, or try to convince them to continue the interest only payments for another year or two?

Hi All,

I appreciate any answers and guidance in advance. A group of us 4 investors are looking to form a partnership to purchase a property for commercial purposes and have a few questions about if we are going about this in the most efficient way.

Property is in San Diego County and consists of about 40 acres. Seller wants $1.75 million total. Seller says they will accept $300,000 down (non-refundable) with lease payments of $4,500/ month (doesn't count towards principal) for 3 years in which we would have to pay the remaining $1.45 million at that point (title stays in seller's name until then and also pays the property taxes). We would then seek to get a commercial loan to pay the remaining amount. The thinking was that the limited lease payments of $4.5k a month would provide some additional time to establish the business revenue.

The business: Short-term rental on two houses (One is turn-key, the other needs a little improvement then can be rented out). Estimated short term rental annual revenue estimated conservatively at $60k/year ish. Pumpkin patch and apple orchards (+ some ag tourism related activities) would be the other initial business pursuits. Estimate pumpkin patch revenue estimated at $100k for first year then by year 3 around $250k. Apple orchard takes much longer to establish and revenue wouldn't be realized until year 5 or longer but can net as much as $100k/acre for U-pick operations (+ cider making, etc).

The problem: Although we are all business owners of our own entities separately, none of us actually have any experience with commercial lending.

The questions: Initially, does structuring a deal like that up front with purchasing in a few years make sense or dumb? If so, we aren't positive on the commercial lending part when year 3 is up. Would we need to put an additional 20% down on a commerical loan at that point to qualify, and what flexibility is there in establishing income minimums to even meet a criteria for commercial lending? It is my understanding that it isn't like traditional loans like mortgages based on personal debt to income ratios but more about the properties income potential? We have a few more questions but wanted to see if anyone there can shoot holes in this plan and help educate a bit more on the process. Thank you again for anytime spent reviewing and responding.

-Garrett

Hi All, 

I appreciate any answers and guidance in advance. A group of us 4 investors are looking to form a partnership to purchase a property for commercial purposes and have a few questions about if we are going about this in the most efficient way. 

Property is in San Diego County and consists of about 40 acres. Seller wants $1.75 million total. Seller says they will accept $300,000 down (non-refundable) with lease payments of $4,500/ month (doesn't count towards principal) for 3 years in which we would have to pay the remaining $1.45 million at that point (title stays in seller's name until then and also pays the property taxes). We would then seek to get a commercial loan to pay the remaining amount. The thinking was that the limited lease payments of $4.5k a month would provide some additional time to establish the business revenue. 

The business: Short-term rental on two houses (One is turn-key, the other needs a little improvement then can be rented out). Estimated short term rental annual revenue estimated conservatively at $60k/year ish. Pumpkin patch and apple orchards (+ some ag tourism related activities) would be the other initial business pursuits. Estimate pumpkin patch revenue estimated at $100k for first year then by year 3 around $250k. Apple orchard takes much longer to establish and revenue wouldn't be realized until year 5 or longer but can net as much as $100k/acre for U-pick operations (+ cider making, etc). 

The problem: Although we are all business owners of our own entities separately, none of us actually have any experience with commercial lending. 

The questions: Initially, does structuring a deal like that up front with purchasing in a few years make sense or dumb? If so, we aren't positive on the commercial lending part when year 3 is up. Would we need to put an additional 20% down on a commerical loan at that point to qualify, and what flexibility is there in establishing income minimums to even meet a criteria for commercial lending? It is my understanding that it isn't like traditional loans like mortgages based on personal debt to income ratios but more about the properties income potential? We have a few more questions but wanted to see if anyone there can shoot holes in this plan and help educate a bit more on the process. Thank you again for anytime spent reviewing and responding. 

-Garrett

Thank you all for the comments/responses and suggestions. I'll message you to discuss some of those options. 

I'm exploring options to generate enough funds to purchase a $450k investment property but don't have the liquid cash. I have another rental property free and clear and considered securing the funds by taking a mortgage out on it. I'm not certain of my debt to income ratio at the moment, but if I try to mortgage out a property to purchase another, does the rental income I anticipate getting from the new purchase factor into the debt to income calculation? Or am I looking at this all wrong and would be better to just to find a hard money lender to finance this?

Awesome information @Davido Davido. I'll be sure to do some research with the references and guidance you've provided. Thank you for the prompt responses. 

@Davido Davido Thank you for the thorough response and clarification of options. I will peruse the links you provided. My initial thoughts were that if I were to acquire the property then I wouldn’t have to disconnect the electrical (although that in itself is not complicated) it would be one less responsibility I’d have to be concerned about.

My efforts to reach out to whom I thought was the deceased’s son resulted in them stating they are not in fact that individual so I’m back to square one. The property is located in AZ so not sure how that may change the laws in which you reference but ideally I’d like to reach out to whomever would be the heir of the property and make an offer so that they can at the very least be compensated for their parent’s assets but I wouldn’t rule out putting in the effort to acquire via other means if all other efforts have been exhausted.

Would the shared electrical line/outlet meet the definition of using the property in the event down the road I have to provide examples of continued use when applying the adverse possession process? Or is their a more strict guideline that provides examples of “property use.” It sounds a bit like an individual would be breaking a law to actively use a property they are not in possession of but admittedly I know very little of that process and am aware that even squatters have rights over time. Thanks again for all the info.

Any idea if I were to formally complain to the County about the current junk as it is now being a zoning violation that they would put the leg work in to contact the appropriate heirs to clean it up or would it likely result in them mailing the deceased property owner and it just pretty much stop there?