Help with No Money down deal
I have been approach by a person who knows that some of my investments are in C-D class areas and that I am familiar with Section 8 properties. He is leaving the area and selling off his properties. He has offered for me to take over the loans and there is 25%-30% equity in the houses. I have a meeting with the bank this week to discuss the deal. The idea is that there will be little to no money down as the required equity is already there for loan. Here are the numbers:
5 Houses
Price: $420,000
Total rent: $4950.00
One of the houses has no loan on it and was stated it is the only one that can be negotiated on.
What I am trying to get my arms around, is the pros and cons of the deal.
Cons
1. The rents are definitely lower returns than I am use to
2. In an area that has very little chance for appreciation
Pros
1. No/very little money down
2. Collectively there is around $500-$600 of rent increase that could be made.
3. Should be able cut the price of the 1 house by 25-30k.
It is the No money down that has messed with my emotions on this. Even though the returns are lower than I am use to, I could sign some documents, pay closing cost and start cash flowing +/-$2000 a month (not including maintenance cost).