INTERVIEW WITH BEN LEYBOVICH NOLAND ARARACAP
have the Fee Simple Absolute title to the property;
On February 4th, 2013 I closed a 10-unit. This is a
unless I have the legal title. With this in mind, I
1980 two-story structure, with a mix of 2 brm/1.5 bath
define creative finance in the following way:
and 2 brm/1 bath town-house style units.
The
purchase price was $373,500, or $37,350 per unit.
Creative Finance is a combination of tools,
The Scheduled Gross Income on the day of closing
techniques, terms, or approaches which allow us
stood at $5,805 per month, while the monthly
to gain ownership of assets without needing cash.
Operating Costs added up to just about $2,400,
resulting in monthly NOI (Net Operating Income) of
As to a “typical” deal – there is no such thing.
roughly $3,400.
Every deal is different because the problems being
solved are different, requiring different modes of
Just going by those numbers this was a solid deal.
acquisition and financing.
The going CAP Rate in my neck of the woods for a
building such as this, representing this particular
Having said this, I do tend to utilize a blend of
revenue stream, is 10%, meaning that most investors
private and institutional financing in most of my
would have been willing to pay about $410,000. Thus,
deals.
I very seldom utilize short-term money
by paying $373,500 I received a little bit of a discount,
nowadays because I think this is dangerous in
but not much – about $36,000, which put me at an 11
today’s environment. I work with medium to long-
CAP.
term money; minimum five years. I utilize tools like
and
For me, more value than this discount was represented
substitution of collateral quite extensively. But, the
in the financing package that I was able to structure.
deal I am going to tell you about just happened a
Would you be intrigued if I told you that I closed on this
few months ago, and is actually one of my more
deal with $5,300 out of pocket?
straight-forward ones.
financed 100%, but a 1.5% down is pretty good, I think.
blanket
notes,
cross-collateralization,
Sure, this wasn’t
Most people would have automatically assumed a 25%
down-payment. But this would have meant close to
$100,000 out of pocket.
My experience has been that
success is a function
of knowledge, and knowledge
takes time and effort
Some day I may be in a
financial circumstance that allows for writing a check of
this magnitude, but as things are – forget it! Having to
write a check like that would have made this deal
completely unachievable for me today.
So, how did I do it? Well, true to my methods, the
financing package included a blend of an institutional
portfolio loan for 70% of the purchase price, and a
private loan collateralized with a promissory note and