Creating win-win scenarios

2 Replies

Hello BiggerPockets!

I am so happy to share the following story with you guys!

My name is Adam Adams, yes that's my real name, yes my parents have a sense of humor.

I've been a landlord since the crash of 2008 when I purchased my first multi-family. but because of BP I found a hidden gem in a specific area of NE Ohio last July (13 months ago from writing this).

So, last year I purchased 3 houses and an apartment building up there and they all have cap rates above 18%.

Since my partners and I purchased these for cash... all monies were tied up so I got creative and offered some friends a significant interest rate to "be the bank" All three houses are paying my friends 12% interest and I still pocket enough to cover all turnovers, maintenance, mortgage to my friends, and future capital expenditures. We are still receiving cash flow above 150/door.

With the newly made private funding we have a duplex, triplex, and home UC and we already have 80/20 loans with other private investors in our network all 3 new buildings again have 18% cap rates and my friends are going to be getting 12% on their money, again, while we have plenty coming in to cover the debt service and then some.

To use one example: the duplex is in a great C+ neighborhood with long term tenants each unit is receiving 600/mo (1200 gross) and our purchase price is $36k (value is approx 60k) our private lender is doing a deed of trust for 30k and we are covering the 6k plus closing costs.

Approx Expense for the duplex:
10% property management $120/mo
7% property taxes $84/mo
6% insurance $72/mo
And then we budget (set aside):
27% for cap ex, maintenance, and turnovers $324
$300/mo goes to the 12% interest only loan to my friends and we pocket/cash flow $300/mo

I run a local (Denver) Real Estate Club so I'm lucky enough to be well connected in an area where even the BEST cap-rates to be found are still well below 10%. So offering an 80/20 1st lien position for 12% interest only payments has been very well received so far.

Even if you're not in a city like Denver, there is trillions of dollars out there in stagnant IRA funds collecting no more than 1% interest so I don't think it would be a problem for you to find someone willing to make 6% 8% 10% or 12% on their money, and have it secured by real estate!

I'm thrilled this has been such a win-win for me and these other investors. I hope this story inspires you to think outside the box and create some win-wins of your own.

Adam Adams
Landlord, Podcaster, and Creative Real Estate Specialist.

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