Rental 2-family

7 Replies

We are closing on a 2-family house that was REO , for 160k with 20% down. It is a good deal and similar homes were listed at least a 50K above. Another investor is offering a 20% investment . Says he will put 25Kof his money , as well as live in one of the rental units -the bigger one. He says that way the property will be well maintained and no headaches of renting it out etc. What is the best thing to do ? We searched a long time for this deal and it is our first investment . Is it worth taking on a partner for resons mentioned above? Your 2 cents is appreciated

i dont understand. you are buying and closing on it, but he wants to pay 20% to live in the other unit? your explanation is confusing to me.

why not rent both units to renters and not investors?

what are the rents? just because other buildings are 50k more, it does not mean it's a good deal for buy and hold. the rents need to be around 1500 each for this to be a good deal. what are the numbers?

Sorry if I wasn't clear . This investor wants an equity share of 20%. Apart from that HE would be the renter in one of the units as well. I wd get 80% of the rent he pays and he keeps his 20%. He says as an owner- renter he wd take better care of the property.

I am expecting a total rent of 2500per month in total.my down payment is 36k. Taxes are 5500.

Run that one by me again?

The investor/partner pays 20% of the purchase price for a 20% ownership in the property.  This entitles him to 20% of the net profits - and a 20% interest in the escrow accounts - not to 10% of the gross rental receipts.  I say he should pay 100% of his rent and you can pay him his 20% of the net profit at the end of the year when the tax schedules are completed.

stephen
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Originally posted by Account Closed:

Sorry if I wasn't clear . This investor wants an equity share of 20%. Apart from that HE would be the renter in one of the units as well. I wd get 80% of the rent he pays and he keeps his 20%. He says as an owner- renter he wd take better care of the property.

I am expecting a total rent of 2500per month in total.my down payment is 36k. Taxes are 5500.

Obviously, I have no idea about this situation, but something feels off to me. Do you know this guy?

I would look at it as two entirely separate transactions, and make sure you have covered yourself legally for each of them. If you do it right, the fact that you are also renting to him will have absolutely no impact on the fact that he is your investment partner. Otherwise, it seems like there are a lot of loopholes that could somehow be exploited. (Such as, how do you evict someone that owns part of the property if they choose not to pay the rent.)

I hope you can make it work it. It sounds like a decent plan, but I would be wary.

to put it simply, here's the best case for you - he signs a rental lease, pays you the full rents and forgets all other ideas. you were looking and are getting a rental property. you didn't look for a partner. why are you deviating from the plan?

number wise, i think this is a bad deal. is there any cash flow or you are hoping it would appreciate?

Thank you guys , for your ideas.Even I was wary as to how to evict an owner occupant if the property appreciates and I want to sell .

@George P. I am putting down 32k . Monthly payments including mortgage(abt 870) plus taxes(5500/12= 458) plus insurance (80) = 1408. Rent would be about 1800 for one unit(4 bedrooms1.5 bath ) and 700 for the other(1 bedroom, one bath) , totaling 2500.

I figured after maintenance and vacancies, I would still have some positive cash flow, since occupancy rates are good here, in Jersey City and labor is not expensive for maintenance

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