I was at a point in my life, in the early 90’s where I had stepped out on faith and quit my 9-5. I still remained in the field of hospital administration doing consulting. Real Estate became my primary focus and while I was a consultant I was able to identify two more properties with potential. So you ask, no money, no job, how did I do it?
Creative Financing – Seller Carry Back
The first was a five-unit building located just west of the Fox River in Aurora, IL, brought to my attention by the owner of a management company. The asking price was $75,000. When I inquired about the financing, the agent told me it had an existing first mortgage of about $41,000. The interest rate was 0%. Stated differently, all the money that went to pay the mortgage paid off principal. In addition, the seller was willing to hold a second mortgage.
I learned that the seller was in an unfortunate position. The building had been profitable for him, but he had incurred a substantial hospital bill for one of his children and he did not have health insurance. He got tired of bill collectors hounding him, and decided to sell the property. The key thing for him was to get a $10,000 down payment so he could pay off the hospital. He didn’t really want to sell.
He and I agreed to a purchase price of $70,000. The seller would carry a second mortgage at 0% interest for six months, and 10% thereafter. He also agreed to manage the building for a monthly fee. The monthly payment helped him, and having him as manager helped me.
I took in an investor – a cousin through marriage. We closed, and the building ran well.
Creative Financing – Loan Assumption
The other building was a four-unit property located on the east side of Aurora. Two of the units had two bedrooms, and two had one bedroom. The asking price was $59,000. The seller was the owner of another management company.
He had bought the property in foreclosure for $35,000, and put in approximately $10,000 to restore the building. He was cashing out his investment. From my perspective, the numbers made economic sense and offered an acceptable return on investment – 15%.
Financing was available from the existing lender, although we had to be approved to assume the loan. The seller basically wanted his existing equity in a cash down payment. Since I had cash available from the four-unit building and my cousin wanted to invest in another building, we bought this one too.
The seller agreed to a price of $56,000 and agreed to manage the property at no charge for a year, and to do so thereafter for $50 per month.
Creative Financing – Doing What’s Right
The building was brought to my attention by the real estate agent who had sold me the six-
unit building in Aurora. Both the seller and I liked and trusted this agent. Sadly, just one
week before the closing was scheduled; the agent suffered a massive heart attack and passed away. The seller and I, working in good faith, pieced together the various elements and completed the transaction. We made sure the agent’s widow got the commission.
So you see readers, no money, little money, limited experience, dead agent and all, you can still get a profitable deal done. Don’t give up on becoming the next mini-apartment mogul.