Short Sale Multifamily Property
Your rate is high, you may be facing foreclosure. Your lender will not work out a new plan to reduce your payments. Today there is a way out to reduce your payments make money with positive cash flow and keep your property. It is a short sale!
That does not make sense you may say. If you sell your property for less than you owe your current mortgage company, you no longer own the property. You sold it.
This is true.
Next if you sold it how can you receive a positive cash flow on property you just sold?
Sale Lease Back
There are companies that will buy your home from the bank if the bank is willing to negotiate a reduced price no more than 60% of the market value. The hedge fund will by at from you with the bank accepting less than what is owed to them. This is called a short sale. The company will then allow you to lease back your income producing commercial real estate based on the lower price than they paid for it. This allows you to have lower payments and profit from the increased cash flow. Though you no longer own the property the hedge fund will execute a lease back agreement that gives you the option to purchase the property within 10 years based on the value you originally owed on the property. This is a win – win win proposition.
Win Win Win
The bank wins even though they accepted less money than what was owed to them because they got a non performing asset off of their books. Too many non performing assets reduce the value of the bank and the value of its stock, increases regulatory activities and causes to have more assets in reserve than they would otherwise be required to. There is also no telling the cost to foreclose and maintain the property before it is actually sold.
The hedge fund wins as they purchase an income producing commercial property far below value. The asset produces enough income to easily provide a good return on its investment. The sale lease back puts free management in place and a promised appreciated return on their investment of at least 60%.
The property owner wins because they are losing the property to foreclosure and the property is currently not generating the income to sustain the current mortgage. Now they can receive a positive cash flow based on much lower financing payments. Otherwise the owner would lose all rights to the property and no income. The sale lease back arrangement allows the property owner to regain ownership in 5 to 10 years.
This short sale / sale leaseback program for income producing commercial real estate is a good opportunity for real estate investors to keep their property and increase their profitability even after a short sale transaction.
Down Payment Assistance
Let us start off by first dispelling the rumor that down payment assistance (DPA) is something for nothing. For commercial projects the down payment may come from a third party but it is in reality funded by the seller. This means it is a creative way to allow the seller to cover the down payment and sometimes even the closing costs. This will allow a real estate investor to purchase an income producing property for little or no money at closing. To make any deal work you first need a motivated owner who is willing to cover the required DPA and the costs associated with it. THE DPA is Seller Funded!!! The seller Funds (Pays The Down Payment) the Down Payment from their equity!!!
Unlike a residential first time home buyer programs that the DPA will come from a government entity, bank (for CRA purposes) or a non for profit organization; in commercial transactions the seller always funds the assistance. No entity has a financial or other interest to give money to people to purchase multimillion dollar income producing investment property other than the seller.
Seller Funded DPA
Once you have an owner – seller willing to utilize creative financing the assistance in the sell of their property you now have the first requirement for a successful creative transaction. Without a willing seller there are no creative financing deals. As a commercial real estate investor attempting to purchase property using little or none of their own money, your first job is to find that willing and motivated seller. But not only must the they be willing, they must be able. This translates to equity in the investment property. Lots of equity. If you expect to fund a project without using your funds the property should have at least 30% equity. Sure you can do deals with as little as 20% equity, but the options for financing are greatly reduced and the buyer will pay at least the closing costs which would include substantial fees for the DPA. Most loan programs that work with DPA are hard money or stated lenders. These programs require a larger down payment.
Given a willing seller and an income producing property with substantial equity, you now have the minimum requirements for a seller funded assistance program.
How the DP Program Works
- Willing Seller
- Property with Substantial equity
- Contract is written for value of the property (seller will receive agreed upon net amount)
- Third Party DPA Company or private investor sends funds to escrow for closing (from buyer).
- Escrow title company sends DP funds plus fee back to 3rd party company at disbursement of escrow (from seller).
- PropertyValue: $1,000,000
- Loan amount: $750,000
- Seller to net: $700,000
- Down Payment: $250,000 from 3rd party DPA Company
- DPA Fee: $30,000
- Return to DPA Company from escrow: $280,000
- Balance for additional closing costs: $20,000
- Net to Seller: $700,000
This is an ideal situation. There are many variations to this deal based on the terms of your specific transaction. You have an opportunity to purchase property from motivated owners willing to utilize creative financing with seller funded assistance for both the closing costs and /or the required down payment. This is how the seller funded program works.
SMALL BUSINESS LOANS UP TO $5,000,000.00
– Up to 90% LTV
– Rates starting at 4.75%
– 20-25 year amortization
– 25 year fixed rate options available
– Purchase & Refinances (cash out ok)
– Flexible Underwriting
INVESTMENT PROPERTY LOANS UP TO $5,000,000.00
– Loans Up to $5,000,000
– Rates Starting at 4.25%
– Programs: 3, 5, 7, 10, 15 year fixed rates
– 650+ FICO
– 75% Max LTV
– 20-25 yr Amortization
RURAL PROPERTY PROGRAM UP TO $10,000,000.00
Loans Up to $10,000,000
– Owner Occupied and Investor
– Rates Starting at 5.25%
– Programs: Adjustable, 5 yr fix, 10 yr fix
– 600+ FICO
– 90% Max LTV
– 25-30 Amortization
BUSINESS LINES OF CREDIT
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