Creative financing for down payment

We are looking at a $4 million park.

$1 million down payment.
$3 million seller financing at 6%, amortized over 20 year, balloon payment due in 5 years.

We have $400 000 cash, so we need another $600 000 just to make the down payment. We probably need another $200 000 for reserves in case something goes wrong. So let’s say that we need $800 000. We will refinance in 5 years when the balloon payment comes due.

Are there any lenders that will finance the $800 000 we need for the down payment and for reserves? Will hard money lenders finance this? Can the forum please share creative financing ideas?

Thank you.

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Is the MHP bank financeable as it is now? If it is one thing you could do is get the bank to put down 70 to 80 percent LTV, then the out of that cash the seller could lend you what you need to put down as a 2nd mortgage.

@joshmule, thank you.

I am sorry, I don’t quite understand.

Purchase price $4 million.

Let’s assume I can get a bank loan at 70% LTV, therefore, I will get a $2.8 million bank loan, and I will have to put down $1.2 million. But I only have $400 000.

Could you please explain what I should do step-by-step?


Assuming that the seller likes you and you’ve made him/her/them believe in your ability to make the Park work after you take over, get the seller to lend you what you need for the down payment to the bank. The seller has lots of cash at closing and can easily write you a 2nd mortgage note. Keep your $400k for reserves or improvements to the park.

When the bank asks you “where are you getting your down payment?” you say “investors”. That isn’t untrue, it just so happens that your investor is also selling the park to you.

@joshmule, thanks. I think I understand.

So assuming a $4 million bank loan, 70%LTV, I need $1.2 million down payment.

I think that the bank will want the $1.2 million down payment before they release the $2.8 million loan. So, if the seller does not have $1.2 million cash to lend to me, then it won’t work right?

All of the payments at closing happen at closing. The bank puts its money into the closing attorney’s escrow account, the attorney then distributes the money to parties owed.

In this case the seller doesn’t leaving with 100% of the purchase price… he forgoes being paid the last $1.2 million (the exact amount the bank wouldn’t lend you), but gets a 2nd mortgage note signed by you instead. This leaves everyone happy. The bank get’s a first mortgage with only lending their LTV. The seller gets his purchase price in cash, less the 2nd mortgage amount that he lends you, and you get the park with $0 of your own funds down.

The bank and especially the seller will take some convincing of this. You have to inspire confidence in your ability to make the Park work and run in a financially viable way, such that that the sellers don’t mind being one of your investors. Pay attention to the balloon payment specifics on the 2nd mortgage. If the seller gives you the typical 5 year balloon payment, make sure you have a real plan to pay off the note or refinance after increasing the value of the park in 3 or 4 years. You don’t want to be caught when the 2nd mortgage goes away in 5 years with no refinancing alternatives.

@joshmule, awesome, thanks for the advice!

Its a subordination deal. Plain and simple
The bank must be fully informed.
So should the seller.

So when the smoke clears, what is owed to whom?

2.8 MM on the bank first - 70% of 4MM purchase price
2.8 MM on the seller second - 4MM less 1.2MM to seller at COE
that 5.6 MM on a 4MM purchase.