How to structure 100% financing for an apartment building?

Is it possible to buy an apartment building with 100% financing, if so how would you structure the deal?
In Buying Property - Asked by Riley F. - Dec 30, 2012
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Answer(s)

Peter C.
Kailua, HI

Yes. It depends on the motivation and capacity of the seller to understand the process. You could use a master lease agreement with purchase option. Take a building that needs a lot of rehab. Tell the seller that you want to put the money into the rehab, and not the down payment. Then you spend the next 36 months or so, to get the property up to speed and a more stabilized occupancy. The deal is subject to the owner financing the deal for 2-6 years after the building is stabilized. You pay the owner/seller a lease rent on a negotiated part of the cash flow for the first part of the lease agreement. After the building is stabilized you go in for conventional or "other" financing at an improved property value, thus getting nearly or better than 100% financing. Hope that helps.

Dec 30, 2012
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Frank R.
Owner/Investor
Carolina, PR

fins a seller willing to carry a note for 20% of the sells price and bank finance the other 80%.
Wala a 100% financed property.

Jan 1, 2013
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Dale S.
Owner/Investor
Willard, OH

If the bank will allow seller seconds, most lenders these days will not or will only allow less than 20% carry by the seller. This does not cover your 3rd party costs and closing costs.

Jan 1, 2013
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Carmen C.
Owner/Investor
Birmingham, MI

Another option is using an asset based lender with any properties you may already have. Obviously, free and clear ownership would be ideal, but even with using them to refinance the current mortgage, assuming the equity is enough, you can always go that route if the seller is unwilling to carry anything, or to even supplement the combination. Anything can be done, you just have to think creatively. A good asset based program, like ours, will work in the hardest of situations. That's because they will fund just about anything of value that can be easily liquidated. FYI, you're going to pay for it , as well- with interest rates typically around 12-18%, but IT"S WORTH IT if you have a good exit strategy!

Jan 8, 2013
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Robert M.
Broker/Agent
Redlands, CA

There are some good answers in this thread. Here's my input. Each situation will be different. The biggest thing is to find the motivation of the seller. That is key on how to structure the deal. With that said, one scenario could be to offer 20% down and the seller finance 80%. The seller may consider this option if they are ready to retire and no longer want to deal with managing the property. The 20% could come from a partner who is willing to subordinate their 20%. The benefit for the seller is that they are getting cash at the closing and cashflow, in the form of payments over time. Another scenario maybe if they still have a loan against the property. Offer to take over the payments by wrapping the existing loan, and then the remainder could come from seller finance, partner down payment or any combination. Hope that helps.
Robert Mendieta
Senior Commercial Associate
# 951-977-3251

Jan 16, 2013
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Rob B.
Chandler, AZ

Tracy....
My answer to your question would be "Yes, BUT VERY CAREFULLY". There are many reasons for not doing this, lender acceptance among them for any portion of the amount that will not be carried by the Seller.
Very often, Sellers will sell a property to transfer the headache of the property to the buyer. Or, for those that may carry 100% of the note, to transfer the payment of insurance, property taxes and maintenance for the period the buyer holds the property. Also, to gain the interest income from the property during this same hold. (The longer the buyer holds on, the better for the Seller, as he or she will likely structure payment of taxes and insurance to be paid directly to to the note holder (seller) as a part of the note agreement. This to assure the essential cost items are paid timely.)
Then at some time following if the buyer gets into trouble making the note payment, the note holder, (the seller), will then foreclose; and can begin the process all over again at some future time.
I may be a skeptic, but as I said just exercise great caution and ask yourself, why is the seller willing to sell with no down-payment required?
Good Luck and Onward and Upward!
Rob Baird
rob@capratecommercial.com

Feb 15, 2013
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marilyn b.
Corporate Investor
Grayson, KY

what is master lease w purchase opt

Mar 5, 2013
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Joe L.
Broker/Agent
Dallas, TX

Go to some TV-infomercial seminar and listen to the crap they spout and then go out into the market pretending to be Donald Trump. If you're in a lousy market you may be able to do such "creative financing", but don't expect to do it in any market that's even remotely hot and active. "Seminar Suzies" are the bane of a professional broker's life. If you come across as one, don't be surprised when savvy brokers never return your calls.

Jun 5, 2014
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