I just came across a great deal that is being listed through an agent (retail). It's 4 BRAND NEW townhomes, located in a very good area near where I live and work. Each townhome is rented at $1200. The insurance is $1700, taxes are $1251, maintenance is $75 per month. They are asking $650k for it. In my opinion, I think this is a great cash flow opportunity.
As a broke newbie with low credit, this is obviously just a dream. I started thinking that a possible way to get an "in" on this deal, would be to present it to, and partner with some investors that may not have a problem considering such a deal. I had the opportunity to meet some at the last REIA meetup, that appear to be potential candidates for such a deal.
Obviously, cash would not be something I could bring to the table. On the other hand, I am presenting this deal to them, and I can offer to manage the property and possibly do some lite maintenance work in exchange for a "piece of the partnership pie". If anyone has any suggestions on this thought, I would greatly appreciate it. As an added thought, I also wonder what's to keep any of the investors from simply using the deal I present without being included in it. Again, any words of wisdom would be appreciated.
Paying $650K for $4800 in rent is not a very good deal. Very unlikely to produce positive cash flow.
If you're putting zero cash into the deal, its hard to justify getting a very big "slice of the pie". Cash is what matters.
If you do manage the property (most states require you have a real estate license to manage properties you don't personally own) then you would be entitled to the property managers charges. Typically 10% of collected rent. On this deal, collecting that 10% is probably a lot more profitable than actually owning the properties.
Jon Holdman, Flying Phoenix LLC
Did you run the numbers? Are you trying to the raise the full $650k, or just the down payment? With 30% down, the cash flow will most likely be negative. What are the comparables caps in the area? Also, what about utilities (water, electricity...etc.) and trash collection?
@Jon Holdman and @Patrick Noel - I appreciate the great responses. The things that were pointed out to me are quite obvious. Wish I could have taken the moment to run the numbers carefully. This is were the wide eyed newbie in me came out!
Jon - You also point out a very valid point about attempting to profit, without much contribution to the partnership. Also, with getting the RE License.
Patrick - I realize the other items you mentioned are necessary (water, electricity, trash...). The agent sent me basic information, without much of a breakdown about those important expenses. Again, the newbie in me came out and emotion set in.
I think it's safe to say that I won't be pursuing this one. Back to the drawing board!
No problem @Orlando Paz It's better you learn it through the forum then get into a bad deal
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