Posted by ray@lcorn on August 14, 2003 at 20:15:43:
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.