I have an opportunity to purchase 4 multi - family properties that are at great prices and so far due diligence is turning out great as well. The range from 37% LTV to 63% LTV if I were to have a loan - so they are listed way under market value…all have tenants and good ones at that. I have spoken to most tenants lately. These are also all in great areas that are desired and becoming more desired each year. They all have a cash flow ranging from 450 - 850 per month after all expenses including holding back for maintenance/repairs.
What I am wondering is, how does a person finance this many — even if I wasn’t to finance them all at once — without running out of credit lines? It seems with multi’s that private money and hard money is out and the only way to purchase is conventionally which seems like their is such a strong limit on the number of loans that can be taken out?
Any help/advise would be great. Also, these are not crazy high properties. Prices are $36,000, $45,000, $69,900 and $165,000. All are 2 family except the $165,000.
Any help or advice on a purchase strategy would be much appreciated. My business partner has really good credit but her income/debt is around 43% so I didn’t know if this would put her over the limit. I currently have good credit but my income/debt is high right now due to school loans that aren’t due to be paid for another year.
Thanks so much! I really appreciate your help!
-Angie
Contact a commercial mortgage broker. He can tell you exactly what you’re looking at. Use what you learn to negotiate terms with the seller (or use what you’ve learned to beat up the seller and make him come around to accepting terms of some kind / seller financing, etc.).
Ask lots of questions of the seller. Why is he selling (sounds basic), and find out if he just wants all cash verses ‘needing’ all cash. If he ‘needs’ cash, how much? How soon? Once you’ve got a clear picture of his situation, you can very easily offer him a solution… (other than all cash, hopefully).
Can you get a blanket mortgage. Ask the mortgage broker about that. Portfolio loans from a smaller credit union might an a source of funds.
The individual loans sizes you’re talking about are practically the least attractive to banks. It costs the same to service little loans as it does big ones, so the motivation is less.
Just for giggles, when you start looking at properties in the 4 and 5 million dollar range, everybody just gets so adorable and cuddly with you …cuz everybody involved in your transaction is making some serious fees (which is fine), including the bank.
Did you know that refinancing is easier than getting a new loan? Maybe the seller will finance you for a couple of years, so that you can establish a performance history with the property, and then get a new blanket mortgage and pay the seller off… Things change with financing availability, so be prepared for a ‘plan b’.
Thanks so much for all of your great information javipa!
Unfortunately I have a few obstacles with the seller. Even though these are non MLS properties I am working with an agent - but he is works with investors only and is all for owner financing so that’s not a problem. The issue is that the owner does not speak any English at all and his family members are the ones that are translating but sometimes they don’t understand very well either so when we proposed owner financing he was absolutely against it - not even the slightest bit of being open. I even offered to pay his asking price if he would finance with balloon for 2 years - and told him why it would benefit him since not only would he get full asking price, but also interest on top of it…wouldn’t even budge. He doesn’t need the money. He has about 25 others he is selling. He just wants to get out and nothing to do with them anymore I guess. Just not motivated enough seems.
I will try the blanket mortgage. I am putting together a loan proposal for a mortgage broker that approved me already when I was only acquiring one of them so maybe throwing in the other three won’t be a big deal haha. hopefully.
I can’t even imagine looking at 4-5 mil dollar properties but at the same time I can’t wait to get to that stage!
I thought about a hard money lender and then refinancing because I have heard that was easier but then I got nervous on losing them because I didn’t know what a plan b possibility could even be with these properties if I couldn’t get refinanced for some reason…
If you’ve found an agent that supports seller financing proposals, you’ve got a very good agent and you should treat him/her very well.
Back at the ranch…
Just a thought… Why not offer to buy all this guy’s properties at once for a bigger discount? If for instance, this seller is so anxious to sell that he won’t even entertain short term financing, why not offer him 50% of retail value for his props and then either get 50% LTV loans (hard money in this case would work), and then sell, or refinance later? Maybe 60% of retail would work for you (and the HML…)?
I realize this is out of left field, but maybe the guy has some serious need/wants/issues. Maybe getting all cash and having all these nuisance properties out of his hair, would be a big enough pain reliever that he won’t need his broken English translator relative’s helping to figure if this is a fantastic deal, or not…? Hmmm.
I love that you offered this guy full price to flush out his potential bluff about not seller financing. That’s what I’ve done many times. However, at full price, I’ve had to have better terms than a 2 year balloon… Just saying.
:beer
It’s a game and I love playing it. It’s really fun when you can keep the seller off balance with a little humor and they respond good-naturedly. It doesn’t always work, but some sellers will roll over like puppies for a scratching, if you disarm them with some humor.
i just put together a proposal showing how much more this dude will make if he were to owner finance me so that he will see the oppty he will miss out on if he doesn’t. crossing my fingers :).
actually, these prices he is asking for are so good that i don’t mind paying what he asks but if he makes me go the conventional route he is going to pay cause i’m not paying what he’s asking if i have to work it like that. haha
Contact your local Board of Realtors and local Attorney’s group. See if you can find an educated professional who is a native speaker in the seller’s language. Pay that person an upfront fee, and a bonus if he can negotiate a deal you want.
Hospitals also have mandatory lists of translators. You need someone on your side who can communicate not just in the language, but in the proper negotiating style of that country. You may be offending that seller with your American directness every time you show up.
Maybe you should be bringing a gift-wrapped chicken or some other token of respect.
(Since I don’t know what language/country that is not meant in disrespect. Hey, I am an immigrant myself and would like a chicken.)
There are several financing options available in the market right now for multi-family properties. The best one for this situation would be to seek to roll all of the properties into a blanket or portfolio loan. Each property would be underwritten individually but the all of the properties would be combined into a single loan. By underwriting the loans individually you are able to sell individual properties in the future. A great resource in this transaction is a commercial lender, they would be able to combine the loans freeing up additional money for future investments.
Additionally I would recommend seeking the advice of a great real estate attorney in your area who can best structure the investment between you and your partner. The right business structure will protect your investment in the future.
haha. hopefully.