HOW TO STRUCTURE FINANCING - Posted by IZZY

Real Estate Investing Real Estate Financing
1

Posted by chris(Indiana) on August 05, 2003 at 20:50:42:

If you don’t mind me asking what lender are you using? I hope to be in a similar situation but with a building priced much cheaper. Thx…

Chris

2

HOW TO STRUCTURE FINANCING - Posted by IZZY

Posted by IZZY on August 05, 2003 at 03:39:25:

Someone please help with this,

I am looking at a property

SELLER IS ASKING: $812,500.00
80% LTV MORTGAGE $650,000.00
SELLER WILL CARRY $162,500.00

I HAVE 3 MONTHS RESERVES WHICH MORTGAGE COMPANY NEEDS

But here is my problem:

  1. How much in closing cost should I expect ?

  2. I do not have the money for the closing cost, is there any way I can structure the deal so the seller can pay the closing cost ?

  3. What if we increase the sale price to $900,000.00, so I can obtain an 80% LTV loan for $720,000. Is there any way I can agree with seller to the origial price ($812,500, not $900,000)and the seller can then give me the difference between the $650,000 and the $720,000 so I can use that difference for the closing cost.

  4. What if we increase the sale price to $900,000.00, so I can obtain an 80% LTV loan for $720,000., But waht if we include in the cotract that I will be entitled to $70,000 credit for repairs this amount I can then use for closing costs.

  5. Someone please give me ideas. Thank you

3

Re: HOW TO STRUCTURE FINANCING - Posted by Don Dion

Posted by Don Dion on August 05, 2003 at 10:37:25:

The key here is to find a lender that will allow seconds most commercial lenders dont like them. I have a few that will go into the lower loan amounts like your in need of. Here is a suggestion: figure your debt service on a 75% first and a seller 15% second for a total of 90% LTV. Then if there is still room maybe you can increase the loan amount to include the closing costs also.

4

Re: HOW TO STRUCTURE FINANCING - Posted by Ryan

Posted by Ryan on August 05, 2003 at 08:56:23:

IZZY,

I’m hoping this is a multi-unit building based on the price. Most lenders will require that you put at least 10% down towards a purchase like this. The only way I have done a purchase this big without putting money in was using a hard lender but I had gotten the place way under value. Your closing cost should not be $70k. If they are someone is taking advantage of you. Have you calculated your cap rate or your GRM for this property to determine if the existing property can support the loan payment? The property would need to appraise higher in order for the seller to be able to pay the closing costs and still maintain the 80%LTV for the property. I would request that the seller pay your closing costs out of his proceeds without increasing the price and see what he says. You never know unless you ask.

5

Re: HOW TO STRUCTURE FINANCING - Posted by IZZY

Posted by IZZY on August 05, 2003 at 15:27:56:

Hello Ryan:

This is a 4 family in a very expensive location. The rents will cover the debt service. My lender does not require a 10% down. Only requires 3 months reserves which I have. They also allows seller seconds.

I understand you to suggest the following:

  1. Ask seller to pay closing costs. Seller might agree.

  2. But what if seller is not willing to pay for the closing cost. How else should I structure the transaction so that I can obtain the closing costs from the loan proceeds ?

Thanks