Other Options to consider - Posted by Michael Mororngiello
Posted by Michael Mororngiello on March 21, 2000 at 17:46:55:
With the 12 units you have a “commerical” property designation. These can be difficult to finance and also to refinance in the future.
It sounds like you have a FLEXIBLE and perhaps motivated seller on your hands? it would be a shame to have those very restrictive 1st lien terms on the property where you’ll have some concerns about taking out the short term dangerous balloon payment that will become due in a year. Additionally the sellers 2nd lien will slide into a 1st lien position when you attempt to refi unless you negotiate a subordination clause into your deal with him/ her.
With a seller willing to hold a sizeable 20% 2nd lien , there may be some alternative ways to make this work;
What is owed against the property? Are you or were you capable of putting down any cash as a down payment?
Depending on the amount of cash you can put down and your credit background you may be able to approach the seller to hold BOTH a 1st lien and a 2nd lien. The 1st lien can be set up over a longer period of time as “psuedo” permanent financing. That 1st lien note then can be sold at the time of the closing or shortly thereafter to provide CASH to the seller. Now you do not have a short term dangerous balloon fuse staring you down in 12 months. You have time to breathe. The seller will continue to retain his 2nd lien and collect monthly income on that note.