How to fund bundle deal!

Real Estate Investing Real Estate Financing
1

I have the opportunity to buy 10 properties. Asking $866,000. The total SEV is $1,300,000. Total gross revenue is $103,000/yr. They are all houses except one 6plex. Is it possible to get a zero down commercial loan since the borrowing will be less than 80% of the total value? Any creative ideas?

2

How about a long term lease

You didn’t tell us too much about the needs of the seller. Sounds like someone tired of handling a bunch of properties and looking to retire. Usually these people own it free and clear.

On the other hand, it could be a bunch of up-side down properties in dire need of repair located in war zones, and the owner wants out.

If it is the former, an investor I know years back has great success in “leasing”, with an option to buy. It’s structured this way:

  1. Option money, tax free to the lessor.
  2. A Master long term lease, 30 years or greater as I recall, where you collect the rent, handle all the maintenance repairs, and you make a monthly payment to the lessor.

Benefits to the lessor:

  1. There’s no capital gains due immediately, and even the option money is tax free.
  2. On his death, due to stepped up basis, there’s little or nor estate tax due.
  3. Lessee handles all the operational headaches

Benefit for the lessee:

  1. You don’t have to go get a mortgage.
  2. You can mortgage the leasehold, which might even cover payments such as option money to the lessor.
  3. When the lessor dies, usually heirs want the money right away, and you can negotiate a advantageous sales price for yourself, buying out the lease. Heirs are usually motivated sellers.
  4. With escalating commercial rents, you benefit from the upside.
  5. On the other hand, if things go south, you can give it back to the lessor. The investor I know, who happened to be the lessor in one case, took the lease back (long story), and even made money doing so.

The downside:

You have to explain the benefits. My dad had a commercial property years ago, and some investors proposed this to him. He asked me about it, and wanted to know what the difference between him collecting the rent and a lessee collecting the rent and taking a cut?? Now that was some years before I studied leasing and didn’t understand the tax aspects. No one offered him option money right away, which would have made a difference in his thinking.

All of this has to be explained right, structured right, because this arrangement is highly unusual for most unsophisticated sellers, such as my dad.

3

Great Info.