Finacing Multiple Rental Houses
financing 5 or more multi-unit houses
Any suggestions on how to go about doing this? I don't have the cash for 10% down on each one, I am aware of the 80/20 deal but I don't know if that's such a great idea because of the high interest on the 20%. I'd like to "seller finance" but haven't pitched it to the seller yet (seller owns all 5). Would it be possible to take out one large loan say for $250k? Would a traditional lender do such a thing or would I need a HML?
How good of a deal is it? If you are holding long term and the monthly cashflow is strong, I wouldn't worry so much about the second's interest rate. If the seller is motivated, definately pitch seller financing with delayed payments, like, to start making payments in 12 months or something like that. It all hinges on how motivated the seller is.
[addsig]
you can have the seller sell to you with owner financing, take 5% down, and sell the 1st lien he carries back on each property AT CLOSING, cashing him out, and allowing you into all these properties.
Rates will likely be in the 8-9% range to minimize his discount on the note purchases. Not sure if that works with your cash flow calculations.
This way, you can work with multiple note buyers if some want to cap their exposure with one N/O/O buyer in one geographic area.
It can be done, let me know if I can help. best, Dave
Thanks for your replies I think the owner might go for owner financing, I'll be talking to him about that this weekend. I think he might go for selling the notes at closing question is what type of hit would he take selling a 30yr note 10%? 20?
As far as the discount is concerned, the program our firm works with is a flat $7500 off of the 90% first lien based on them selling at 100% appraised value, as long as buyer credit profile, valuation, and title work hit certain parameters. They can sell for less than appraised value, but this will affect their net cash at close, so this has to be taken into consideration when negotiating with them.
In addition, suggested rates (since the seller is the lender and can set rate wherever they want) is suggested to be around the 8-9% range to get to that minimum discount figure.
Hope this helps, Dave