Posted by ray@lcorn on February 09, 2010 at 06:28:33:
In Reply to: Re: The perfect posted by james (CA) on February 05, 2010 at 00:47:52:
James,
There's no formula or template because every deal is unique. The the market, the owner, the lender, the physical condition, zoning... and on and on... all combine to form the particular circumstances that must be dealt with, so there is no one size fits all... more like one size fits one.
The deals I've done have ranged from paying only $10T in closing costs on a $650T deal (call it Deal 1), to a $100T down on a $900,000 deal (Deal 2).
For Deal 1 we went in with essentially no money, and negotiated (actually demanded) a $50T credit line for tenant upfits. The loan terms are interest-only 4.5%, three-year reset, six-year call. We "granted" the lender right of first refusal on the permanent loan when the property reaches stabilized status. I got a little frisky with that one because the deal started with the owner who knew he was in over his head, but the bank was slow to come around in acknowledging reality. Patience isn't one of my character traits, so the longer they dithered the harder I made the terms.
In Deal 2, the seller financed the entire balance at 4.5%, interest-only, with a three-year reset and five-year call. There was no underlying debt. We also got an agreement from the seller to release half the property (excess land) for a specified price, about half of market value, at our option.
I've closed another one which was somewhere between the two above. I've got others working that span the same range. The key is to evaluate the deal accurately, and form the investment plan around the circumstances. The down payment becomes a minor issue. More important is the ability to perform, and in many cases the capital is better used in improvements than down payment.
ray
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