Please evaluate this deal on a commercial property

General Real Estate Investing
1

Hi, I need help evaluating two options on a commercial property. The potential buyer is having issues getting a conventional mortgage.

Agreed upon purchase price when contract was signed (before finding out they didn’t get the loan): $250,000 They have already put in $10,000 earnest money in escrow.

They have come back and asked for owner financing. The real estate agent made a few suggestions. Which of these suggestions is better for us, and which is better for the buyer… and why?

The term for both options is 2 years.

Option 1:
$15,000 down
$2,000/month
$700/month applies to paying down purchase price

Option 2:
$20,000 down
$2,000/month
$1000/month applies to paying down purchase price

The buyer is planning on spending anywhere from $6,000-$8,000 on paint, carpet, etc. upon moving in.

Thank you in advance! I am trying to evaluate this for my boss. He wants to know which option is better, “by the numbers”. I think he means time value of money etc. Unfortunately, I didn’t take finance courses.

2

Hi,

Assuming the buyers were actually putting $50k (20%) cash down to purchase why not find a private money lender to loan 65 to 70% of purchase price and carry back a 10 to 15% note (2nd TD) on the property at 8%.

This get’s $162,500 to $175,000 cash out of the loan plus the $50,000 down payment to result in a gross of $212,500 to $225,000 cash before closing cost’s which can be immediately re-invested back into other projects while holding a $25,000 to $37,500 2nd TD note either amortized or interest only for some period say 5 years.

This will provide roughly a $167 to $250 interest only payment or a roughly $507 to $760 amortized payment.

Now I think your boss want’s his cash and your the one to provide it for him.

Look online and google “Private Money Lenders” find one who likes the deal and rate’s, fee’s and point’s are reasonable and then put the buyer with the lender you found, it’s that easy and most of these private loans put emphisis on the deal and not the buyers credit.

Good luck,

             GR