Would you take this low/no cashflow deal?

[Johnnie Bembry]

Hey guys, I'm a newbie looking for some advice. I'm looking to do a BRRR back in Kansas and I came across a deal where the owner is offering owner financing. I know for the most part people love owner financing but in this case, I'm not sure if it's worth it. The owner is looking for a total purchase price of $25K with $3K down at 10% interest over 6yrs so my monthly payment would be about $410. The property is a 2bd/1bth 720sq ft single-family residence and the details in the listing say the roof is newer, the vinyl siding, and the foundation is "solid" which I'll verify all this if I decide to look deeper into this deal. Just from the pictures, this house needs about $10K worth of updates (paint, appliances, and curb appeal)...ARV is $38K-$40K based on recently sold comps.

My biggest concern is cash flow. After running my numbers, I'll be hovering just over the break-even point but will own the house in 6 yrs which then I should be able to pull about $30K after refinancing. This is the only reason I'm considering this offer. (My cash flow numbers are taking into account the vacancy, management fee, maintenance cost, and CAPEX.) So should I look more into this deal?

Good or bad let me know what you guys think. Thanks in advance!

[Joe Villeneuve]

Originally posted by @Ned Carey:

@Johnnie Bembry yes lots of people like owner financing but you should never do a bad deal just because it has owner financing. (Not saying this is a bad deal)

Whether to hold for 6 years and then own free and clear depends on your financial position overall. Can you support the property is something goes wrong? do you have cash reserves?  Doing these kinds of deals will make you very happy when you own the properties free and clear in 6 years.

One reason for owner financing is the ability to get in for a low down payment. That is not the case here because in addition to your $3k down you are putting up $10k in repairs.

Keep in mind with such a low price refinancing may be tough when it is paid off just because of the small size of the loan.

If you want to get geeky about it calculate your IRR for a reasonable holding period of say 10 years. Does the opportunity cost of earning nothing on $13k for 6 years pay off in the long run.

@Joe Villeneuve

Do you want to comment

Yes I would like to comment @Ned Carey, thank you.

"Ditto".