Need help w/creative financing options

We are selling a 4-plex in IL, as we have since moved away (to TX) and want to have property locally. The property cash flows, has a history of basically NO vacancy, and is above average in quality and condition.

The buyer is a friend of a friend who is buying this as their first rental property. I referred them to my mort. broker and she has been able to get 100% financing for them. (an 80/20 deal) They didn’t know this was possible, so now they’ve latched onto the idea of possibly being able to buy this w/out bringing ANY funds to closing. We’re willing to sell them the property at a higher price and pay their closing costs if it turns out the lender will allow that (we’ll find out Monday.) But then the appraisal comes into question. The higher value will be there with the income approach and cost approach, but this property is so much nicer than anything in the area the sales comp approach could be a problem.

Can anyone think of any good, creative ideas? We’re basically needing to come up with about $10,500 to close the loan. I’m guessing they’ll go through with the deal even if they have to come up w/ the $$ (they have it, it’s just all tied up in various investments), but I’m a little afraid to take the chance. This is just such a “fall in your lap” deal for us, at the price we wanted, I haven’t had to spend anything on advertising, a trip up there, etc…I’d just really like to help it along if possible.

What other details do y’all need to help me figure this out?

(Yes, I’ve already tried to gently talk them out of financing the property this way, but they’ve latched onto it and think it’s the best deal for them.)

Karla in Amarillo

Howdy Karla:

Why sell? I would not spend $10,000 to sell anything even if you are getting $100,000 2nd note. Maybe if you can sell the note but note buyers want the borrower to have money in the deal and will discount the note as well. Your best option may be to keep the property until you find another buyer or just keep it for the cash flow and find a good management company. Take the $10,000 and buy 4 or 5 deals there in Amarillo. I just saw a 15 unit deal there for $19,000. Are there any more around like that?

LOL

Ah, Ted? Why sell? Have you got all day? LOL

No, seriously. It’s “time” to sell this. The community it’s in is in jeopardy of having some MAJOR economic downturns in the next couple of years. I have a VERY reliable inside source who has warned me to get out while the getting is good. Also, we co-own this prop.with my parents and they’re pushing for the sale. If we were to pay to have it professionally managed, although it would still cash flow, well, we could just do SO much better with that $$ by managing our own stuff here. (Yes, the market is GREAT here!)

We’re not “spending” the $10.5K. We’re netting the price WE want for the property. It really is a great deal, and the fact that we’ve got nothing into selling it just makes it that much sweeter. The buyers are sweet people and I’m just trying to help them out, as people have helped me out along the way. Not help them financilly, just help come up with ideas.

Now…as for the deal you saw in Amarillo…is it still available?

Karla in Amarillo