Buying Apartment Building with Seller Financing

currency, finances, wealth-3118767.jpg

apt loanPosted by: kensan
 Mar 15 2003, 02:00 PM

where can i get financing with 10 % down on a 8 plex apartment complex? are there banks or private mortgage lenders that will loan on 10% down on 5 units or more apartment? any other options or solutions when you don’t have 25 to 30 percent downpayment?

need your advice…

Posted by: loanuniverse Mar 15 2003, 03:47 PM

Dear Kensan:

It will be very difficult to find financing from a Commercial Bank with a loan-to-value over 80%. Lending at those levels is against the credit policy of most banks and lending at the levels you are proposing is against guidelines established by bank regulators. In order to get something like that approved, senior management would have to get involved.

Your best bet would be to convince the seller to carry a 2nd mortgage. This would mean that at closing the seller gets your downpayment, the money from the bank and keeps a mortgage on the property. in order for this to work the mortgage of the seller is subordinated to the one of the lending bank.


You purchase a $500,000 Apartment building.

You give $50,000 of your own money.

The seller keeps a $100,000 2nd Mortgage paying 7.5% If the seller is a person interested in regular income such as a retiree, the idea of getting 7.5% return while certificates of deposit are paying 3.5% for 5 years is very attractive

The Bank gives you a first mortgage in the amount of $350,000 This represents a 70% effective loan to value

Good luck on your project and I hope to have helped.

A follow up:

Seller FinancingPosted by: loanuniverse Mar 31 2003, 11:40 AM

A little more about my position on seller financing:

Over the weekend an email from a visitor mentioned that she had considered asking for seller financing until she read some posts in this site.

I want to make clear that I am all for seller financing. However, I am against buyers thinking of the achievement of financing as the goal of the transaction. Financing is nothing but a tool to make it possible to do the transaction. Your primary consideration when buying income property is the kind of return that you can get from the property. I can remember a couple of conversations with friends where I would ask questions like: How are you going to rent that? , How are you going to fix that? or How are you going to pay that? and all they could keep mentioning was the fact that the seller was willing to finance. Do not fall into that trap.

Nevertheless, Seller financing can be very useful and with a properly motivated seller it can be more advantageous than third party financing. You could get a higher loan-to-value, a better rate and easier qualifying.
Author: Commercial Loan Underwriter

Leave a Reply

Your email address will not be published. Required fields are marked *