Buying out a person's LLC share
Hi:
I would like some feedback on a potential opportunity that has been presented to me.
A bit of context: I live overseas and have a very demanding job that I enjoy and so I don't have an interest in taking time to chase real estate deals. I invest in Provo and Salt Lake City Utah remotely and have a team there on the ground that take care of things incredibly well. I currently carry two mortgages on investment properties and don't want to carry another mortgage at the moment. I have a fair amount of money to invest in properties and so I am willing to give up a bit in terms of return on investment in exchange for minimal hassle and to not have to think about my investments that much.
Here's the opportunity: I have a friend who owns a triplex with his partner and the partner needs out and is interested in selling his 50% ownership in the property. The mortgage is in the partner's name and he is willing to continue to carry the mortgage by maintaining a .5% share in the llc with no ownership rights (It goes without saying that there is a lot of trust between the three of us).
Here are the details:
Location: Provo, UT, C+ neighborhood.
Asking price: 273k
Amount left on the loan: 124k
Asking price for me to take over ownership: $68,950 (essentially ask price-mortgage + some negotiation around avoidance of realtor fees/closing costs,etc). This will be paid over a year in four installments, with no interest incurred.
Mortgage payment: $730/month
Property management and lawn care: $85/month (property manager is my current manager for the other properties I own)
Utilities not paid by renters: $45/month
vacancy rate: they have only had one month of vacancy for all three apartments in 5 years, so not a big deal.
repairs: minimal. The current owners have done all that is needed at the moment.
capex: $180 (assuming 10% of rent)
Thus, total monthly expenses are ~$1040
Revenue from rent:
$750+550+525=1825
Monthly cash flow: $785/2= $392.5
I would appreciate any feedback on what you think of the investment as well as any advice on this fairly idiosyncratic arrangement.
Many thanks in advance.