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Patrick O. Oswald
Patrick O. Oswald, Wealth Advisor
Category: Finance
Satisfied Customers: 14
Experience:  20 years experience on wall street with both major and boutique investment banking firms
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I BOUGHT A BUILDING ON A BOND FOR DEED , I AM RENOVATING IT

Customer Question

I BOUGHT A BUILDING ON A BOND FOR DEED , I AM RENOVATING IT INTO 5 CONDOS ,KEEPING ONE ,I AM USING MY OWN MONEY FOR RENOVATING COSTS WHEN I SELL ONE 65% GOES TO MY LENDER TO PAY DOWN THE LOAN I KEEP 35% TO OFFSET MY CONSTRUCTION COSTS. I AM HAVING TROUBLE WITH MY SELLER/LENDER AND WANT TO PAY HIM 100% AND MOVE THE DEAL TO ANOTHER LENDER.I OWE HIM $350K I HAVE 2 LEFT TO FINISH AND SELL ,I SHOULD GET $550K FOR BOTH TOGETHER. I SHOULD BE FINISHED IN 3 MONTHES, BUT THEN I STILL NEED TIME TO FIND BUYERS FOR THE 2 REMAINING UNITS I HAVE ALREADY SOLD 2
I HAVE FOUND ANOTHER LENDER AND HE IS ASKING ME WHAT TERMS I AM LOOKING FOR?
SO MY QUESTION IS WHAT TERMS SHOULD I ASK FOR THAT WILL BENIFIT ME THE MOST AND STILL BE ENTICING TO HIM?
PLEASE GIVE ME A FEW CHOICES, THAT WILL NOT STRAIN MY CASH FLOW, REMEMBER I AM USING MY OWN MONEY TO COMPLETE THESE RENOVATIONS BEFORE I SELL THEM.
Submitted: 5 years ago.
Category: Finance
Expert:  CGCPA replied 5 years ago.

Welcome to Just Answer. I am here to help you resolve your tax and finance concerns. Please feel free to ask anytime you need extra help.

Perhaps the best concept you can offer the lender is a participation for his loan. In other words for a lower interest rate you offer a percentage of the profit on the sale of the units. Given the track record you can show this lender it may be a very enticing offer. Banks are not paying him very much right now so a low interest rate can be simply 2-3% more than he will get at a local bank. Yet this, combined with profit participation could make this far more rewarding to him. Yet it will only be so if you do well and then the larger profit will also be yours. The key to negotiating with a lender is to keep the structure simple. It leaves less to mentally digest, is easier to monitor from both sides of the deal, and offers rewards for a profitable effort. However, any agreement between you should be in writing. You will need an attorney to draw up the documents.

Expert:  Patrick O. Oswald replied 5 years ago.
You have many options. What is the current rate on the 350k loan from the first guy.. Clearly you would like to lower this. Most hard money lenders will not work for less than 10%, Perhaps you could offer some kind of balloon payment that would entice you to finish the job ASAP. 8% for 3 months... 10% for the next 3 months, and then 12% thereafter..

I would also encourage you to find a real partner, and cut them in on a share of the gains when the units sell in return for a lower rate up front... Finding this kind of dough may be difficult... Do you have any friends at banks?
Customer: replied 5 years ago.
Relist: Other.
I need an answer from a banker or someone who is in the loan bussiness