Updated about 4 years ago on . Most recent reply
Help with deal analysis + terms
A friend has approached me with the following deal. I put up the down payment for a house that he will live in. The house is in the natomas section of Sacramento, CA. The down payment will be 80-100K. He will pay the mortgage plus $500 and handle repairs. He plans to live in the home for 10 years and wants to split the sale price after that time. I have my own reservations but want to hear thoughts from seasoned investors. Is 6% annually a good return given the risks? Is there a way to make this make sense? If so, what additional info would I need? What structure would we need for this type of deal?
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In my opinion, this isn't the most effective use of your money. Would you make money? Probably. But if you put that $100k into five properties valued at ~$100k (20% down being $20k), you'd reasonably be able to get $300/mo cashflow per month meaning $1500/mo pocket money (not to mention principal paydown, tax sheltering, and appreciation).