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I may have a possible solution for you to consider if you still need help, but I'd prefer to discuss it off boards. Send me a PM if you still need a solution.

Do you have a lender lined up? The loan is too small for us (since we do apartment and commercial properties, preferrably over $5MM at 85-95% LTV). But if you can qualify for a loan on this smaller property, then what I would like to suggest should work just fine!

Let me know if I can help.

Kelvin

Hi,

The seasoned writers from this forum make very valid points. However, there's in an additional point I'd like to bring out. While it is true that due-diligence and proper pricing should prevail, sometimes it is also valuable to NOT be too heavy-handed in getting the price to where you want it.

By this, I mean, there are times when it would be better to leave some of the price on the table and negotiate terms and conditions, rather than to beat a seller down on price (unless of course the building is in perfect condition and you're paying all cash). If this is not the case, and since many lenders want to know that you have "skin" in the game, you might consider these possble opportunities:

1) Once you've determined where you need to be on pricing, let the seller keep some of their asking price, in lieu of them paying for some of the repairs -- For one customer seeking a reduction in the price of a commercial site from $700K to $550 to cover half of the land development costs. When they rejected that, I suggested countering with their $700K price, but them paying $150K toward the cost -- to which they agreed.

2) If there is the possibility of the seller being flexible on terms if they can get their price (or closer to it) then this would make sense also, depending on what your exit strategy happens to be. Take for example the situation that you gave. If, in fact, he only paid $37K for the property and now is looking to pull out $870K, you might look at splitting the difference in price, but find out what he intends to do with the money. Since you said he's elderly and looking at retiring, you might ask him to finance a substantial portion of the purchase price with payments deferred and a simple-interest structure that is on par with what he'd get from the bank where he'd make the deposit. In other words, perhaps he'd be agreeable to having the interest accrue on the loan (no payments) for 1-5 years at 5-6% interest and then balloon. If you don't have to make payments on that part, this increases your cash flow. And assuming the building is in reasonably good shape and in a good area, you can pocket the cash flow while the building appreciates to pay off the accrual at a later refinance or sale. You both win!

That's just two possibilities. Hopefully, I've stimulated thoughts of some other possibilities.

Kelvin

Ed in Va.,

I just joined the forum, so by now I suspect you're all situated. But I thought I'd let you know that I'm here, if you still need any help.

Chauncey and Scott make good points about the loans and the structure. And while the fees may seem a little high or provide the "sticker shock" that was mentioned, it might be helpful to look at it a little differently.

One of the overlooked points is that since you noted that you ended up with this land, rather than actually having to come out of pocket in the end, you are likely to be positioned to get cash back when the loan converts to permanent financing. And keep in mind, rather than having two sets of closings, you have the ability to go with the construction-to-permanent mortgage with 40-year, fixed-rate, low-interest financing. Additionally, you are NOT having to personnally guarantee the loan! The property can stand for itself.

If you decide to sell later on, the loan is assumable. So the Buyer can bring you the difference between the remaining loan amount and your sales price without having to go get a whole new loan.

Some fees that quoted are estimates as well and are likely to be brought down at the end. But it's better to get the "sticker shock" on the front side, rather than just before Closing. We'd love to get a PM if you or anyone else needs the help for new construction, acquisition, or refi's above $5MM. It's just a lot easier to qualify the project when you get into this range than under $2.5M where you've got to use your personal resources and credit.

We can try to get you more answers if you need them. We'll be glad to help.

If you still need help, send me a PM. I have a couple of Hard Money Lenders I can refer you to depending on your circumstances.

I'd like a copy also. I looked on the site to see if it was posted, but didn't find it.

Thanks,

Hey,

You got some good responses back (although I think I'll watch out for Monday's -- some were a little "testy"). There are some loan programs that will go up to 75-80% of the After Repairs Value and there are also some lines of credit that can be set up so that you have the ability to close quickly and pull funds when you need them.

I like the idea that you should have your work scheduled out in front as well as how much money you need for each phase. I've beenn moving over to Commercial properties and financing because, believe it or not, in many ways it's easier to get a loan to buy or build a $5 or $10MM apartment complex or commercial building than it is to play some of the games with residential rehab, schedule and chase contractors, etc. We have some sources for rehab financing if you need them, but, depending on your investment philosophy and where you want to get to, you might want to look at stepping up to commercial financing where you can get away from having to personally guarantee the loans!

Send me a personal email if I can be of help.

Hi,

Did you get this worked out? I'm new to the forum and would be glad to help if I can. Please advise.

Hi,

I've been doing Residential investing off and on for years and am interested in helping people move up to apartment, multi-family, and commercial properties. Since I've learned that moving up to Commercial investing is not as hard as I once thought, I am looking for people to work with, learn from, and help along the way. I live in NC, but have friends and family across the country and can help bring money to the table. Have recently learned very interesting techniques for commercial financing and am willing to share if we can work together.

This forum seems pretty cool with lots of people sharing ideas and information. I like that and look forward to the exchanges and to doing my part to make it even better.

Make it a Blessed Day!