No Money-down, Commercial Property
I am about to buy a property for 1.8 mil that has an apprasial for 2.5mil. I already have an LLC that I use for investing.
My question is how can I legally (if it can be done) buy the property for 1.8mil with 400k down then somehow get another loan for the 2.5mil, giving me 700k proceeds, which will give me my 400k back plus 300k which i will use as a dp. So in essense I can still get the building for 1.8mil with no money down.
One suggestion was for me to buy it at 1.8mil and then have my partner buy it for 2.5mil. Its like flipping contracts someone told me, my main lender says this wont fly. I want to make sure everything is legit. Any suggestions or ideas will be helpful.
Let me claify some numbers Appraisal:$2,500,000.00 Purchase Price:$2,200,000-$400,000.00 Down=$1,800,000.00 Financed. You have to understand the lending on commercial changed forever with the S&L crisis of the 80's. About the best you can hope for is 80% LTV,which would mean $2,000,000.00 maximum www.financed.It also depends on the credit worthiness of your tenants,and the credit rating of your LLC.
That's correct, you can't expect or calculate getting anymore out of financing.
Most lenders will go off of the LOWER of the purchase price OR the appraised value for one year.
After it's been seasoned for one year, they'll go off of a new appraisal, and give you up to 80% LTV.
You may want to go after private money to refi the whole thing.
Your only other option is to find a flexible lender who will agree with you on the true value of the property and waive the seasoning.
Michael to clarify the situation is like this. I can buy the property for $ 1,800,000, i am willing to put $400,000 down. The property has been appraised for $2,500,000.
Want my question basically is this:
Can i buy with a LLC it for 1.8million w/400k down and then resell it to another LLC (one that i am partners in) for 2.5million, thereby giving the first LLC a profit of 700k, which the second LLC will say is the down payment, so in effect I am able to get a loan for 1.8million, the original price with virtually no money down.
I know this may sound confusing, if it is read it over again and see if it makes sense.
Summary
Building Cost = 1.8 million
Building Appraisal = 2.5 million
LLC-1 buys for 1.8 million w/400k down (real money)
LLC-1 then sells to LLC-2 for 2.5million (the appraised value), with LLC-2 stating it is putting 700k down (money used from the proceeds of the sale from LLC-1 to LLC-2 since both LLCs are owned by the same partners)
Net effect, LLC-2 gets a loan for 1.8million and doesnt have to put money down, b/c it used the 700k profit from LLC-1
Another option was to put an addendum on the original contract but no one feels the banks will go for a 700k addendum.
Quote:
On 2004-01-23 10:53, yitzi wrote:
Michael to clarify the situation is like this. I can buy the property for $ 1,800,000, i am willing to put $400,000 down. The property has been appraised for $2,500,000.
Want my question basically is this:
Can i buy with a LLC it for 1.8million w/400k down and then resell it to another LLC (one that i am partners in) for 2.5million, thereby giving the first LLC a profit of 700k, which the second LLC will say is the down payment, so in effect I am able to get a loan for 1.8million, the original price with virtually no money down.
I know this may sound confusing, if it is read it over again and see if it makes sense.
Summary
Building Cost = 1.8 million
Building Appraisal = 2.5 million
LLC-1 buys for 1.8 million w/400k down (real money)
LLC-1 then sells to LLC-2 for 2.5million (the appraised value), with LLC-2 stating it is putting 700k down (money used from the proceeds of the sale from LLC-1 to LLC-2 since both LLCs are owned by the same partners)
Net effect, LLC-2 gets a loan for 1.8million and doesnt have to put money down, b/c it used the 700k profit from LLC-1
Another option was to put an addendum on the original contract but no one feels the banks will go for a 700k addendum.
I heard of double-closing technique as described above with the LLC1 being a 3rd party investor. However, in your case, since the principals of both LLC1 and LLC2 are the same, I would not be too sure how lenders will view this. Check with your Atty on this one.