I have an apartment deal i’m looking at the seller is willing to do 80% seller finance with me putting 20% down along with a wrap. It’s a nice apartment complex in southern Florida the NOI is $220K and he’s asking for 2.3M here’s the problem I have no money, no credit, and no equity partners what are the steps I need to take to pull this deal down?
:help
how much is your monthly payments on the 80% owner financing?
You need to structure the deal so that it is attractive to potential partners and private lenders.
12.2K a month -so how do I make it attractive for potential partners and lenders and where do I find these people at? If it’s at the local REI group I only get my pension every month that’s just enough for my roof and food -I can’t afford the high membership fees.
Okay, if the NOI is $220k a year/ 12 months = $18,333 per month. If your monthly payment on the 80% ($1,840,000.) is $12,200 this will leave you with a Net Cash flow after debt service of $6133. ($73,596/yr.)
If these numbers holds true, offer a 10% return to a partner plus 50% equity share. You’re looking for a money partner to come in with the down payment of $460k, you will give them 10% return a year ($46k) and 50% of the equity when you sell the property.
You walk away with 50% equity and the rest of the cash flow $27,596 a year ($2,299/mo).
You can try to search for 1 big investor for the $460k or maybe create a TIC (tenants-in-common) partnership. Speak to a knowledgeable attorney when doing this or any type of syndication.
To find these people call mortgage brokers, commercial real estate agents, attorney’s, accountants, 1031 facilitators, medical professionals…Usually, big investors like these you will not find going to REIA groups.
But before you approach them, you need to have some control on this deal such as an option. Then put together an executive summary that describes the deal, have pictures, maybe appraisals (ask if the seller has one and get a copy) and anything that would support your position that this is a great deal. You need to approach this professionally and not the same way you would approach or pitch someone when buying a single family house.
You have to build confidence with your potential investors before they will trust you with their money. You need to be able to answer any possible downside risk. They need to know and believe that you know what you’re doing and that you have unwavering confidence in this deal. Lastly, put together a team such as your attorney, a good property manager, an accountant, a commercial mortgage banker, commercial real estate agent, etc…This is part of building confidence (with investors) so that when you make your pitch they know you are not a one man band.
What are the best ways in contacting these individuals what success have you had in the past give some examples. I can’t imagine cold calling a doctor to invest in a real estate deal. Why isn’t there a website where you can contact high end individuals who have money looking for deals? This is a very frustrating part this has been my akellis for years.
the above advice is great…the only problem I see with all that is the fact that if he is doing 80% he will want first position…If he forecloses then you will have lost out. I understand your main concern is getting a partner but I advise on simply building business credit and then you will qualify for a down payment. the other popular option is to have him do a 100% owner financing deal for 3-5 yrs while you build your business credit up. Noone will want to default on their own property. The 2nd ? I have is did the broker present you with this offer or the actual owner? If its the owner they are normally more flexible. you can also use hard money lenders for the DP. Read the previous forums and there is a ton of advice to feed on…Hopfully this helps a lil’… :beer
If I build business credit don’t I still need the financial track record of past income statements to support the commercial loan -which with the average american job income statements can’t pull of an apartment deal. The answer to your second question is yes i’ve found this through a broker -I may have to send a letter to the seller that I want to buy the property 100% seller financed due in 5 years. Do you have an example of a letter you’ve sent to a seller? Also for hard money lenders they require alot of upfront fees for the due diligence, flight to inspect the property, proccessing fees, and other soft costs I just don’t have. Kennedy Financial wanted to charge me over 50K just to view and inspect the property not even promising if I got the loan or not -and 4 points at closing i’m paying nearly 100 grand before we even close on the property. Do you have any recommendations for an affordable hard money lender with good terms?
I find my private lenders/investor from personal referrals. I ask my attorney, accountants, mortgage brokers, Realtor, and every other business contacts, if they know anyone who is open to investing in the type of property that I am looking to buy.
Once I have control of a property, I prepare my elevator speech and my executive summary of the deal.
No it does not take 2 yrs to build biz credit. As long as you have 5 trade lines, 3 corporate credit cards and a paid loan(commercial loan) you will have a 80 paydex score. So obviously the more $ you have to build biz credit the faster the process…other than that you will always be looking for hard $ lenders and private investors. I do have a letter that I send to the OWNER (not the broker)…And the problem as I stated before with hard money lending is that they will want first position and usually the bank wants the same thing…other than that it can become risky if the property is not performing IAW what you expected…I recommend buidling biz credit so you can have complete control…