I find great commercial properties with more than enough cashflow to cover 100% financing but I cant seem to find the funding to purchase… My credit is marginal income is low and I have no equity or money to invest. Since I moved to Wisconsin I have searched for partners to fund and split profits with no luck. I’ve tried twice to partner with seasoned investors to build up cash on hand but only succeeded in getting my deals stolen. I am open to HMLs but they only offer 50-70% appraised value. I dont know where to obtain the difference.
I did a little wholesaling before I relocated but with the cold weather and no reliable transportation, it is getting increasingly harder to search the neighborhoods for FSBOs.
I find a lot of duplex/4 units priced at 80-85% of FMV and although the numbers add up, I stilll lack the difference for HML and not enough equity to wholesale. I have approaced a few asking to hold a second mortgage with no luck.
Should I just wait until I find the right deal - or until my situation improves? Is it possible to take advantage of these properties?
Somebody PLEASE help… I’m brand new to this website and relatively new to buying and holding but I’ve been studying and I feel like I’m mentally ready to take the next step. Any sound advice is appreciated.
I’m not convinced that properties at 85% fmv are huge deals.
However, considering your situation you may want to sign up some deals and assign contracts for a fee. That way you can’t have a deal “Stolen”.
I wasn’t considering price as the deciding factor - I was looking at the financial statement and income of the property. Example being if the property was being sold 80% below FMV at 200k and the income was 2700 monthly including expected vacancy and maintenance, I would assume this is a good deal at that price.
Am I being naive and over-simplifying the process?
Using HMLs for buy/hold properties is a bad idea. Unless you are getting the property practically for free the points and interest will eat all of your profit and put you into the red each and every month.
it’s very hard to make a HML work if you are purchasing for more than 50% ltv.
You can work in interest reserves to the loan so no payments have to be made, but that can lower the proceeds you’ll receive at close.
We’ve been successful with this strategy when parterning with the current owner of the land on pre-development deals. The HML places a first lien on the property at 60% LTV minus interest reserve and closing costs. Current owner holds the rest at 0% for a term to match the loan term offered by HML. Usually no more than 2 years. Current owner takes all the proceeds from the loan (usually around 50% fmv net) except what we need to get entitlements and a small fee for our time. When entitlements are finished the value has increased and we sell off to builders or refi with a conventional land loan at 50% or less. We’ve done it several times in the last two years and it’s worked out fine.
This could probably work for income producing property provided you can improve value substatially in that time, but i would venture to guess it’s alot harder to find income producing property owners willing to let their property go at 50% fmv.