Posted by Tom Caruthers on March 21, 1999 at 17:41:09:
First, congratulations on attempting to put together a deal! But it brings up some questions…
First, will the property appraise for the higher value? Most commercial lenders value income properties using the capitalization approach.
Second, once the seller sells the note, why is he going to give the money to you? I’d think he’d put the cash in his pocket!
Lastly, 80% LTV is a little high for income property. The lender is going to want to see the contract. It won’t take a brain surgeon to see you have no money in the deal; that scares commercial lenders, big time! You may find a hard money lender to make it work, but be sure the debt service is covered, with lots of reserves for vacancy and maintenance.
Good Luck,
Tom Caruthers
Granite Bay, CA
I recently went into contract to purchase two (2)eight unit buildings for $175,000 each.We agreed that we would raise the purchase price to $225,000 each.The owner would take back a 20% mortgage at 8% and I would find a lender to finance 80%.The seller will then sell the note ($90,000)at closing.This money will be used to pay closing cost and whatever is left I would put in my pocket.The seller was also concerned about the high capital gains tax he would have to pay because the purchase price is now higher.So to satify the seller I agreed to pay the broker’s commission.I am new to creative real estate,and would like to know if there are lenders would finance this type of deal.I have $8,000 cash,and little knowledge.Will it work?Thanks in advance for your help. GREG