Creative financing for multi-family- HCOL area- and I currently manage the property.
Hi all,
I’ve managed a 7-unit building for an absentee owner for about 6 years now. We have a great working relationship and the building is a dream. There were a few pains during the pandemic but we’ve bounced back nicely. The owner has lived far far away since I started managing it- and no longer has an appetite to keep the building and wants something closer to home. I want to buy the building and he’s happy to work with me to get a deal done. The building is in a gentrifying area in a HCOL city. He wants to sell the property and 1031 exchange into a property closer to him. What are some creative ways to finance this purchase with minimal out-of-pocket down payments? 

Thanks
[{"id": "ij3fkxq", "text": "Mortgage broker here. \n\nWhere is the property located? Have you agreed on a sales price? Drafted/signed a sales contract? \n\nSend me a PM and I\u2019ll see if I can help", "replies": [{"id": "ij4wsud", "text": "If OP wants to put little to no equity in the purchase then he\u2019ll likely need some pref too", "replies": [{"id": "ij8ev8u", "text": "Pref?", "replies": [{"id": "ij92ae8", "text": "Preferred equity.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ij3jpdd", "text": "I mean... the seller could finance it", "replies": [{"id": "ij4wp80", "text": "He said the seller wants to 1031 it. That means he needs the equity out. Seller financing doesn\u2019t accomplish that.", "replies": [{"id": "ij4zo1p", "text": "Not sure what you're on about, all it means is he wants to defer tax. If he \"wants the equity out\" he'd list it and sell it.", "replies": [{"id": "ij5ghlc", "text": "To do a 1031, you have to sell a property and use all of the equity to buy another property. You can\u2019t sell a property but keep your equity in it through seller financing.", "replies": [{"id": "ij6a959", "text": "Wrong", "replies": [{"id": "ij81c3f", "text": "You are the wrong one and, even if you were right, your comment was entirely unhelpful. You wasted everyone\u2019s time who bothered to read it.", "replies": [], "depth": 6}, {"id": "ij93mjg", "text": "Just fuck off dude. You don\u2019t know what you\u2019re talking about.", "replies": [{"id": "ijaui7l", "text": "Here you go dumb fuck:\n\n[https://letmegooglethat.com/?q=Can+you+do+a+1031+with+seller+financing](https://letmegooglethat.com/?q=Can+you+do+a+1031+with+seller+financing)\n\nPlease do a simple google search in the future before embarrassing yourself again.", "replies": [], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ij4n0dh", "text": "Get a partner with money. What\u2019s the price point here? $1-2m?", "replies": [{"id": "ij4neww", "text": "Probably around 1mill", "replies": [{"id": "ij4x844", "text": "What\u2019s the T3 cap rate there? Might be able to go small balance with a bank or look into local credit unions. Will be tough as a first time borrower with no assets. Likely will be capped at 1.25x dscr so you\u2019re going to need pref equity from a hard money guy unless you can come up with some cash.", "replies": [{"id": "ij7s0n3", "text": "What is a T3 cap rate?", "replies": [{"id": "ij93jag", "text": "Cap rate based on trailing 3 months annualized", "replies": [{"id": "ijc28k2", "text": "Do you mean NOI based on T3 annualized?  The NOI is not going to change the cap rate.", "replies": [{"id": "ijglrat", "text": "Yes - my question is what is the yield based on the trailing 3 NOI. Banks typically size to a coverage based on in place or trailing numbers. Those figures will need to be adjusted if there's a Ptax reset after purchase (like in California), so then you would need to look at Tax Adj T3.\n\nI'm not sure what your point is. There isn't \"one\" cap rate - it's simply a yield calc. So, holding purchase price constant, whatever your NOI measurement period is, it will give you a different result. Could be proforma year 1 cap, could be T12 cap, or T3, or in place.", "replies": [{"id": "ijgs3f5", "text": "My point was that NOI does not cause a change in cap rate.\n\nYou mention 4 different cap rates.  Can you show the calculation for each and describe its use?", "replies": [{"id": "ijh6hsm", "text": "What you\u2019re saying doesn\u2019t make sense. Cap rate is literally dependent on NOI - you change NOI and your cap rate changes. It\u2019s just a yield calc.\n\nAn investor might use year 1 proforma cap to assess investment appetite but will use a trailing NOI for the purposes of sizing the debt to get to a levered return because lenders typically look at trailing. Lifeco lenders look at trailing NOI on a refi but can use year 1 proforma NOI on an acquisition or construction take out for regulatory reserves requirements. There are an infinite number of reasons to look at various time periods of NOI and all of those numbers vs purchase price or vs debt or vs valuation will yield a different result.\n\nCap rates, debt yields, etc are just metrics that you can easily use to measure risk/returns. \n\nFor example:\n\nCap / DY = LTV\n\nDY / interest rate = DSCR\n\nCap + D/E*(cap - interest rate) = yield to equity", "replies": [{"id": "ijh71bs", "text": "How does NOI change the cap rate?", "replies": [], "depth": 10}, {"id": "ijhbtj7", "text": "Cap rates value.  They do not measure risk or return.", "replies": [{"id": "iji33k8", "text": "Ok... you're clearly the expert. NOI / PP = cap rate. Change NOI and your cap rate changes. period. Let me know if you actually have anything valuable to discuss otherwise fuck off.", "replies": [{"id": "iji3elu", "text": "Where are you getting this pp?  Seems a sketchy made up number.  Let's see the math!", "replies": [{"id": "ijil3mp", "text": "PP means purchase price dip shit. Going back through your old posts, it's clear you're a small time \"investor\" so maybe you just don't understand how institutional investors look at things.", "replies": [{"id": "ijjeihe", "text": "Why can't you answer a simple question?  How did you arrive at the pp?  Dude, you made it up just like your investing experience.  LOL", "replies": [], "depth": 14}], "depth": 13}], "depth": 12}, {"id": "iji5fez", "text": "Cap rates come from an income approach to value called direct capitalization. \n\nV=i/r\n\n$10=$1/10%\n$20=$1/5%\n\nNow if you increase NOI then:\n\n$20=$2/10%\n$40=$2/5%\n\nSee, a change in NOI changes VALUE!  It does not change cap rate.  How can you not know this?", "replies": [{"id": "ijilihb", "text": "&gt;Now if you increase NOI then:  \n&gt;  \n&gt;$20=$2/10% $40=$2/5%\n\nIf I don't change my purchase price from $10, then my cap rate is 20%. See how easy that is? There are 3 variables hombre - any one of them can be flexed to derive the other 2.\n\n&amp;#x200B;\n\nYou're either a troll or a 2nd year Uni student (or both). Take a seat and learn something.", "replies": [{"id": "ijjfcgu", "text": "You are in fantasy land not REAL estate.  Must be grandma selling you $10 NOI for $5.  \n\nV=i/r. $5=$1/20%\n\nYou really can't be this clueless u/neuropat.", "replies": [], "depth": 14}], "depth": 13}], "depth": 12}], "depth": 11}], "depth": 10}], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ij4ruuq", "text": "Installment sale", "replies": [], "depth": 1}, {"id": "ij7rtyn", "text": "Ask him to be the bank.\n\n(yw).", "replies": [], "depth": 1}, {"id": "ij855lg", "text": "I think he\u2019s asking what the cap rate is in the area accompanied with a T3 to value the property", "replies": [], "depth": 1}]