All Forum Posts by: Patti Royster

Hi there.  We are buying our first commercial building from the seller who wants an 8 year lease back from us.  She is selling the building to pay off her debts and so she doesn't have anything to which she can use for a personal guarantee.  She doesn't own a home or have a nice car.  She just has the building that houses the restaurant.  How can I best ensure that I can get something if her business goes bad but I still have an 8 year lease in my hand?  Also does anybody have a fairly simply commercial lease they would be willing to share?  One side is a restaurant and the other side is a computer repair company.

Thanks for your help!  I love BiggerPockets!

-Patti Royster

What's the best way or language to use to get the personal guarantee on the lease?  What if they have no assets?

In our case we are buying a commercial building from the owner who will then become our tenant.  She is using the sale to pay off her personal debts so I don't think she has anything but her work ethic to guarantee against.  She doesn't own a home, car of value, etc.  

What would be the best way to handle it?!

thanks in advance,  Patti Royster

OK so bottom line question - is there anybody out there who has made any money on overages???

thanks for your help and input!

Ok I am new to seller financing and I am sorry for not being clear on my question.

She owes a total of around $164K on this property.  Based on similar rents in the area we believe the property to be worth $224K but that price is an estimate due to the repairs/investment that will need to be done on the property.  We came up with that price doing an analysis of rents in the surrounding area for rental properties.  

Her motivation is that she owes $36K on her own personal property and wants to pay off the mortgage for that property and knows she will have to pay 25% in taxes for the proceeds of the sale of her duplex.  Does that make sense?

Currently on the duplex she is considering selling she said she owes $164K which $30K of the loan is a second at 11% interest and the remaining loan balance is at 2.92%.  Of course I would need to verify both interest rates, mortgages etc. before purchasing the property.  

She is 71 years old and doesn't want to hassle with it any longer.  Upstairs tenants have been there for 6 years and have a lease in place and she doesn't believe they will be moving any time soon.  Basement tenants have a lease in place as well.  Easy place to rent.  Because the property is so old it will require large investments one day to keep it rentable e.g plumbing, roof, two kitchen completely updated and also two bathrooms.  There are only space heaters in the basement.  Forced air in upstairs unit.

I would never buy the property without an inspection.  Just wondering mostly if you would even consider buying such a property given the age?  We would do everything seller financing with an attorney drawing up the paperwork and an escrow company handling the payments each month so she feels comfortable.  Also would give her the option to make quarterly inspections to be assured the property isn't trashed and is being managed well.  Thinking of doing a balloon payment in 10 years if we did the deal so she wouldn't have her name on a mortgage past the age of 81.

Please be patient with me.  I posted this because I wanted help because I don't know all the answers.  I don't know anyone who does in the real estate world.  I want to learn how to evaluate seller financing deals and that is why I asked.  We have been landlords for 24 years so we are not new at this.  We are new at analyzing seller financing deals and making them happen.   Thanks for your help and sorry I wasn't so clear on the first post.  

Hi there.

My husband and I work in real estate together and have been learning as much as we can about seller financing.  We came across this deal and have been considering it but will probably walk away.

The property is a legal duplex 3100 square feet and 100 years old.  Kitchens and bathrooms would need to be replaced eventually.  Galvanized plumbing - may not be as big of a problem since there is only one bathroom per unit.  One unit on top with 4 bedrooms/1 bathroom and basement apartment 2 bedrooms/1 bath.  Rent upstairs is $950 and basement rent is $700.  Owner is 71 years old and is cashing flowing $420/month.  Rents are probably about $50-100 low for both units.

We explained seller financing to her and offered her $30K after giving her an analysis of what she could realistically walk away with if she sold it with a realtor.  She spoke with her 4 kids who thought she was getting taken and now wants $51K for the property.  We were going to have the property inspected but not so sure now we really want to invest in a 100 year old property even if it cash flows well.  Owner owes $164K with $30K at 11% and the rest at 2.92%!!!  Sort of thinking of doing the inspection which will itemize all the things that will need to be updated to show the seller.  We know she wants $36K to pay off her mortgage but she will have to pay 25% in taxes on the sale.

Would appreciate any experience or thoughts you might have!  Thanks in advance.

Just curious if you bought it or not?

It would be awesome to have a 4-plex in one area instead of 4 different properties all around town. 

Good luck!