How does one get a 1M property?
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[{"id": "fbwabmh", "text": "The fastest/easiest way to get a large loan is to get 2-4 unit multifamily property with FHA. They allow you to put down 3.5% and just look at your credit and income. If you have no real estate experience you will not be able to get a loan for commercial property like the example you mentioned without a cosigner who has good financials and experience (which again is unlikely). Community banks would be best for that kind of deal but would want 25% down and good previous experience.\n\nAlso, without being in the business, it is likely a stretch to say you would be able to pay it off in 8 years. I would try to get your hands on a few appraisals of commercial property so you can see the estimates of different expense categories.", "replies": [{"id": "fbwcxqb", "text": "FHA loans don\u2019t cover Commercial properties though so it\u2019s not really relevant. You would need a minimum of $250,000 down but more realistically with zero experience in the industry they would want to see $300k down.  And 8 years is not happening,I\u2019m not even going to break down specific expenses but with 300k down, you would need to throw $87.5k a year at the loan just for the principle. You would probably need to pull ~150k(depending on the property) in rent every year to be able to cover your 8 year payoff goal p+I plus operating expenses.\n\nEdited to reflect more accurate limit, but it\u2019s still not relevant since this is a commercial property", "replies": [{"id": "fbwey3c", "text": "Fha limits depend on the location. The limits by me are around $1.3m. Obviously does not work for offices though.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fbwemz5", "text": "Another idea worth considering for this would be to find someone who has that level of cash around willing to buy it for say...$1.3million, have a contract written up, he pays 1.3 to you, you pay 1 to owner, BAM...$300k profit....if you can't get a loan and would like a quick payoff...", "replies": [{"id": "fbwif00", "text": "And why wouldn\u2019t the buyer look up the owner of the property in public records and just call them directly?", "replies": [{"id": "fbwoe9o", "text": "Yeah that seems shady. But investors may work.", "replies": [], "depth": 3}], "depth": 2}, {"id": "fbxk3lo", "text": "Skipped a critical step:\n\nFirst, get a signed option to purchase for $1M.", "replies": [], "depth": 2}], "depth": 1}, {"id": "fbwguuf", "text": "You are talking about the office building you\u2019re leasing?\n\nIf so Zillow and Trulia valuations are unreliable. They are useless when it comes to commercial property. Look at comparable office properties in the area of similar quality that have sold.\n\nFind out How many tenants other than you that are leasing and paying rent.  Ask owner for P&amp;Ls (income and expenses).  Take out depreciation, interest and amortization. Find out the going cap rate for your area (find other office buildings of the same quality as yours). That should help you get an idea of how much it will cost.\n\nYou should probably have around $200k (if you\u2019re getting a loan assuming a 20% down payment). When you get the financials (income &amp; expenses) make sure the income generated by the P&amp;Ls can cover the mortgage payment and expenses. If It pencils, go to a lender and see what kind of loan you can get. You might also need the lease information of the tenants in the building.", "replies": [], "depth": 1}, {"id": "fbwh3qy", "text": "Thank you all for the input. I guess a loan is out of the question. I do have a good relationship with the owner, do you think a lease to own option would work here if the owner agreed?", "replies": [{"id": "fbwzwi3", "text": "No harm in asking if he'll hold paper. If you can get him to be your lender, that might be the most likely way to make it happen. If he's just trying to cash out, then probably won't work.", "replies": [{"id": "fbx3yc6", "text": "The issue is likely to be what the interest rate would be.", "replies": [{"id": "fbxv1tc", "text": "Perhaps, but that's negotiable and he's not going to be able to secure traditional financing, so it is what is. He could always refinance down the line.", "replies": [{"id": "fbxw03z", "text": "You\u2019re right.  I\u2019m just trying to point out a likely issue to be cognizant of.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fbwm6qs", "text": "opm.", "replies": [{"id": "fbwoic8", "text": "Not familiar woth that acronym", "replies": [{"id": "fbwpi7a", "text": "other people's money.  kind of my first rule.", "replies": [{"id": "fbwr5yw", "text": "Lol gotcha. Do you just ask peiple you know like family or friends? Do you go out and network somewhere looking for investors?", "replies": [{"id": "fbwvdnm", "text": "personally I have a pool of investors, most of whom I'd consider friends.  real estate is a long term game. when you find a great deal you have to pull all the stops and make it happen.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fbwydu9", "text": "If you were using 51%+ of sq footage as the owner then a SBA 504 loan is another option.  Only a 10% down payment is required for those.", "replies": [], "depth": 1}, {"id": "fbwzv7n", "text": "Ask for seller financing for a year or two. Then, refinance it with conventional commercial loan after a year or two.", "replies": [{"id": "fbx3gg4", "text": "This.", "replies": [], "depth": 2}, {"id": "fc1fdyd", "text": "Why is this a good idea?", "replies": [{"id": "fc3v64z", "text": "This *could* be a great option. I will run a scenario for you, say he buys at a true market value for a million, then when/if tenants leave and he replaces them with tenants that pay higher rents. Then after a few years he could take it to a bank and get a 75% loan to appraised value on the property. \n\nNow the property with new tenants paying higher rent and maybe an exterior facelift with some appreciation gets the market value to 1.2 million.\n\nNow he has a loan for 900,000 and if he put down $200,000 for the original seller financing deal then he now has a property worth 1.2 million, $300,000 of equity and he\u2019s only into the deal for $100,000\n\nBut if tenants leave and he can\u2019t replace them or a market goes down, then the opposite scenario happens.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fc6y7ns", "text": "I think this property sounds kind of interesting. Depending on the market, small offices can be readily marketable and you could possibly rent some space to one or more churches to use on the weekend and assuming the kitchen is a qualified commercial kitchen, rent to possibly multiple caterers, food trucks or or other businesses that must produce their food in a commercial kitchen.  \n\nMaybe you could find additional users for the land when the farmers market is out of season and long-term, maybe the land itself has redevelopment potential.  Probably the least risky way to do this is a lease option where you induce the seller with a decent sized option premium that will apply to the purchase price eventually.  That way if this property flops or you discover you don't like commercial landlording, you're not on the hook for a big mortgage.\n\nYou definitely want everything with the option documented and have a good real estate attorney advise you on diligence to be done before signing the option and giving the seller any money, for example a title report, a survey and Phase 1 environmental.   You don't want to invest time and money in properties with unknown liens easements, lacking legal access to surrounding roads or toxic contamination.", "replies": [], "depth": 1}]