Help in structuring this deal, PLEASE! - Posted by Steve (OH)

Posted by Jon Richards on February 01, 2001 at 19:42:59:

This sounds like an incredible deal at 7 GRM in a great neighborhood with upside potential. If your figures are correct, you should do it anyway you can.

One way is to create a seller carryback loan for as much of the purchase price as possible. Perhaps you can afford $20,000 cash down on the $425K sale price. This leaves a loan of $405K at 8%interest only. This keeps your payments low at $2,700 per month all due in 36 months. You could make the balloon in 60 months or more. Just depends on how long the seller is willing to wait.

Here’s what happens: you sell part of the note to Metropoltian Mortgage or another note buyer at an 11% yield. They will buy all the payments and part of the balloon. They will put $240K into escrow. The seller will get your 20K down payment for a total of $260,000 at the close of escrow and then $186,211 when you pay the balloon. This totals $446,211 (one a $425,000 property) to the seller and you get in with only $20K down. Everyone wins.

If the seller demands all cash, you will have to sharpen your negotiation skills. We do this all the time. Visit to learn more about this purchase method.

Best of luck.

Jon Richards,
NoteWorthy Newsletter Publisher
email us for a sample issue at

Help in structuring this deal, PLEASE! - Posted by Steve (OH)

Posted by Steve (OH) on January 31, 2001 at 12:53:14:

Hello all. I need some help in structuring the purchase of two duplexes for buy/hold near a large university campus. Here’s the skinny:

Asking 425k total. Seller has agreed to carry 10% back, but it is at 11% the first year, 12% next, etc. until a baloon is due at year 5. 2nd is amortized 30 yrs. I am leaning towards not using his money (because it would require me to put up 10% and I am trying to avoid this…I have found another option:

I am trying to minimize my out of pocket downpayment etc. (as we all are) and am therefore (I have strong credit, good debt to income, etc.), looking at structuring the financing in an “80/20” fashion as well. Both mortgages through lenders (not owner). 1st at 8% and 2nd at 11%.

Gross income is 1250/unit which equals 5000 total (good rents in my opinion…each side is FIVE bedrooms!). Taxes are currently 200/month (both buildings), but would go up with new sales price (owner bought both for 125k/each in 1989). PMI (if I did 80/20) would be approx 200/month (which SUCKS!..but it is the cost of doing biz).

Appreciation rate in this area has been at/about 8%/year the past 5 or so years.

I am thinking of closing on the 1st of the month and therefore getting 5000 in security deposits, 5000 for that month’s rent and another 5000 in the next month’s rent prior to my mortgage being due on the 15th of the third month.

The reason I am wanting to minimize my out of pocket is because I want to do some cash buys this year, but want to buy good solid cashflow properties in the meantime.

Anything I can do on the “note” end to help this deal go through?? Any input is helpful…thanks.