Posted by ray@lcorn on August 14, 2003 at 20:15:43:
Terrence,
You need to talk to some note buyers to determine the feasibility of your plan. Much will depend on the condition of the property, the current cash flow, and the time needed to renovate the property. I have no idea of what the discount wouold be on a rehab project, but I expect that hard money or partners may be cheaper.
You also need to run the debt positions by the seller. I suspect that he is not going to like being second with what may be the largest portion of the debt.
Usually when I hear a situation like this it sounds like a crafty seller taking advantage of a novice investor. You need to perform some due diligence before going too far. You don’t mention if there is current cash flow. What is the basis of the $1mm valuation? What’s the current use?
If the property has income that supports the “$1mm and then some” valuation, then an alternative to the note scenario would be to have the current owner refi the property to get his cash, then do a wrap mortgage to you as the buyer.
Need Help With Commercial Investment - Posted by Terrence
Posted by Terrence on August 12, 2003 at 14:29:05:
My situation is this…Today I spoke with a gentleman who owns a commercial building free and clear in my home town. He wants to work with me on the sale of this building. He is going to retire and needs to sell this building. He will owner finance the property if I come up with $100K down. The property is worth over a Million and then some, but needs about $50K in renovations to be in the condition I need it in. The reason I have interest in this property originally was for assisted living (Elderly Residents). The town I live in would very much approve of this use of the property.
Now, I don’t have $100K and he knows this, but he is willing to get creative to make something happen with me.
Here is my thought… and any feedback on other ideas will be greatly appreciated.
I could create a note for X amount and sell that note to a note buyer (which I have a few contacts)to come up with enough funds to pay the seller what he needs and to help me renovate the building. Keep in mind the note would be at a very low LTV. Then the seller would hold a private second until I finance the property.
Does this sound reasonable? Again, any feedback will be greatly appreciated. Thank you.
Re: Need Help With Commercial Investment - Posted by Sharon
Posted by Sharon on September 03, 2003 at 12:13:45:
Terrence-
I am a note buyer and would be interested in exploring the feasibility of this property. Please remember, however, that it is the seller of the property who sells the note to a note buyer - not you, the buyer.
Most note buyers will want to create two seller-financed notes…a 1st and a 2nd…the seller to keep the 2nd for income…we buy the 1st at a discount. Typically, the 1st should be structured at 75% LTV, 25-30 yr amortization, 7 year balloon. We like to see at least 10% down from the buyer. The seller/buyer can structure the 2nd however they wish/agree.
Please feel free to contact me at 1-866-875-3096 or write me at smsall@aol.com to obtain more detailed information.