I am selling a business and buyer is offering a 2nd. on his rental property for a large chunk of the price. 2nd will be about 60K for 5 years interest only, balloon at end of 5 years. Does this sound OK and what are 2nd’s going for these days? Thank in advance.
Howdy Jedworth:
Your question is way too vague. We do not know what type property. Is it a Wallmart building with a NNN lease or a run down slum. Is their equity behind the 2nd. In other words in case you do not understand the equity question what is the value of the property and how much will the total debt be including the 2nd. The 2nd is worth more if there is equity. If he owes $40,000 on the 1st and the property is only worth $100,000 the 2nd would be worth less that if the property were worth $150,000. The 2nd would be worthless if the same property were worth only $40,000.
I would also want to know other questions like where is the property, tenant occupied, interest rate, payment history on 1st, there are tons more but I hope you get the idea.
The best way to find the value is to get some quotes. Most note buyers want the note seasoned with at least 6 payments made. You can also sell part or all of the payments and keep the balloon payment. There are so many variables.
LOL