Carryback From Seller
Hello,
I am in the process of making a deal on a 41 unit apartment complex. I have 25 units now. I have always got my loans from my bank downtown and I either put the required amount down or have used equity in my other properties. I need to do something else in this situation because its too much money to put down. The seller mentioned that she could do a carryback. I have never heard of this until now. I'm hoping she can do one for 20%. Is it just a loan that I make monthly payments to her on? I have not approached my bank on this yet. They have never turned me down but I was worried that they might not like the idea of the carryback. Do most lenders accept this or do they have a limit on how much you can get from the seller? Is it possible that the bank might let me in with no money down? Any help or advice anyone could give would be greatly appreciated.
Thanks,
Jeff
[ Edited by studlee on Date 05/10/2004 ]
I would ask your bank just that, but make sure you are talking to the decision maker, not a lackey. As far as a caryyback, it is what you make it. You can either make it a secondary loan with payments, or make it so that they get paid back after refinance. The main thing is that the seller is open to different ways to get the deal done, so you have a wonderful opportunity to negotiate. You will need to know how much they are negotiable on use that to your advantage.
You may want to have the seller do a wrap around, or have the secondary loan go into place to get your name on the title and just do a refinance. There may also be a way where the seller is willing to partner with you for a short period and then you refinance and pay them off. You could always go the hard money route, but you will need some monies for initial costs, usually 1-2 points plus paperwork fees. There are also private investors available that would either partner with you or do the deal for a short time at a higher interest, until you could refinance. If you have equity available in you other properties you could get an equity line and borrow your down payment, or just cross collateralize your equity for the loan. Essentially the same thing, but you will have to see which will be cheaper on interest for you. If you can give us more information about the deal (not the address) and some more info about your situation, we could all offer a more tailored suggestion.
Good Luck,
Kyle
banks tend to be more conservative and don't often like carrybacks. You might be able to use the same bank, but structure it as a partnership, rather than a carryback.
If you've got a good track record and relationship with them and the numbers look good, you may not have any problems at all.
As was said above, the wrap is a good idea. Why worry about getting new financing, when there's financing already in place and you've got a cooperative seller???