Creative RE Financing. A BiggerPockets $625,000 Joint Venture
I'd like to highlight a deal that we recently closed. It was a partnership with another bigger pockets member. @Anthony Russell from sunny California.
This deal took about 4 months from offer acceptance to closing. It had A LOT of moving parts.
1. Bigger Pockets Joint Venture.
2. Out of state investing.
3. Cross collateralization of property.
4. Bank Financing.
5. Owner Financing.
www.HoltonWisePropertyGroup.com
Summary.
18 units. (3 six unit buildings)
Price: $625,000.
Cap rate. Just above 10%
Location: Brooklyn Ohio (Southwestern suburb of Cleveland, Ohio)
JV Terms: 50/50 Ownership split between HWPG & Anthony Russell.
How the deal went down
We agreed in principle with the seller to purchase his buildings for $625,000.
We were coming in with a bank loan of 75% ($468,750.00) The PITI on this loan is split 50/50 between Anthony Russel & HWPG.
The owner of the buildings agreed to cross collateralize & place a mortgage of $90,000.00 @ 6% interest on another home in the area that HWPG owns,
Anthony Russel came in with the other 12.5%
All & All It has been a win win for all involved.
We are very pleased with the purchase & our partnership with Anthony. We look forward to many more deals with him in the future.
Anthony is pleased to passively invest in Real Estate while leveraging his money as much as possible.
The seller is happy to liquidate & still earn a return on his money.
The tenants are happy to receive some more hands on property owners.
Since we have closed We've been busy working on some deferred maintenance on the buildings and are looking forward to some gradual rent increases.
Thanks for reading.
If you are interested in passive real estate investing in the Cleveland Ohio market please visit our site www.HoltonWisePropertyGroup.com for more information.
Comments (13)
Hi James-
What is the monthly cashflow after expenses to the investor?
Leo B., about 9 years ago
Great to hear win win deals.
One question about the JV deal with Anthony, for the 11.35% cap rate, do you factor in reserves for future maint or repairs?
David C., over 9 years ago
yes.
James Wise, over 9 years ago
Working with James has been really great. Over the past month, I've gone from zero to 18 units in one deal, and I feel great. As mentioned, I live in California; and there are not many great cash on cash return opportunities out here. Before I partnerred up with James, I was getting quite discouraged about REI, for there are so many swindlers out there who proclaim to be helping you when that is not their intention.
I worked closely with him to design this deal (as I am a newbie REI); but I was cautious since I did not know him and was almost burned in a separate deal recently that I pulled out of just before closing. James was Awesome. He was very easy going, forthright with information, and professional; thus I new I was making the right decision to work with him.
I had some questions and concerns along the way - as a newbie; but James helped me push through. Any question I asked was answered quickly and appropriate, and whenever I requested a document - I received it promptly. We created an LLC partnership with a comprehensive - attorney blessed - operating agreement, and James was very helpful through that entire process.
I really like the balanced nature of this deal, for it truly is a win-win partnership. We make money together, or not at all. The upfront real estate commission that James contributed significantly decreased the odds of needing any other partner contributions to this property. We just closed in August and the cashflow is fine now given the 12.5% Seller Financing Note, and it will increase year over year and once that second note is paid off after 5 years - we will be making significant cash flow.
Then as the reserve money increases, we may opt to purchase more properties for the LLC with that that money as well. Exciting times.
Anthony Russell, over 9 years ago
Sell or a buyout.
James Wise, over 9 years ago
James
How do you structure the exit strategy for each party in such a deal ? if one needed to end the partnership in a couple of years due to capitol needs, new investment strategy ? would it be placed back on the market ?
Kenneth Hynes, over 9 years ago
oh okay, got it..thanks for the information.
Jay S., over 9 years ago
actually that was a typo. Should say "20yr" amortization 10 year call.
That means the loan is on a 20yr amortization schedule. Pay monthly payments for 10 years then all at once pay the remaining balance off.
James Wise, over 9 years ago
Jay S., over 9 years ago
@James Wise Bank loan $277,500.00---About 5% 2yr amortization 10 year call.
I'm still kind of in my learning stage. Could you quickly describe what "2yr amortization 10 year call" means.
Thanks.
Congrats on your JV!
Jay S., over 9 years ago
Who wants to partner on the next apartment building deal?
Very close to finalizing all the numbers.
(There may be some very minor changes)
$370,000.00
12 units. (2 6 unit buildings)
Monthly rents $5,830.00
Bank loan $277,500.00---About 5% 2yr amortization 10 year call.
Owner financed Note $46,250.00--Secured by other property owned by HWPG. 6% interest. 7yrs fully amortized.
Capital investor contribution (You) 12.5% & some closing costs About $56,000.00
Real Estate commission to go into joint operating account after the sale $5,700.00
Cap rate 11.35%
If you are interested in passive real estate investing in the Cleveland Ohio market please visit our site Click Here for more information.
www.HoltonWisePropertyGroup.com
James Wise, over 9 years ago
What area of Cleveland is this in?
Michael Camaglia, over 9 years ago
Thanks to all those who have showed an interest in this deal & others like it.
I would like to quickly address some of the common questions that iv'e been receiving about this deal & doing others like it.
1. Do you personally do the Property management or do you hire it out?
Yes, My company is personally doing the Property management. Yes, I personally knock on doors if need be. (Did it last night as a matter of fact.)
2. Do you charge an additional property management fee?
No, there are no Property Management charges.
3. Did you or the out of state investor pay the EM deposit?
Anthony paid the Earnest money deposit. In this case it was $5,000.00
4. Did you make a commission on this deal?
Yes & no. I am an agent. The commission on this deal was just over $11,000. Per our JV agreement any monies I receive as a commission in relation to this sale are placed into the properties joint operating account to be used towards maintenance & improvements on the property.
5. I want to do a similar JV deal with HWPG, how do I do that?
Click Here
James Wise, over 9 years ago