I would like some advise on where to go from here. My father in law is a long time real-estate investor that gave my wife and I an oppurtunity on a first rental deal. My father inlaw financed the deal as long as I put my time and sweat equity into the property while managing the deal budgets, contractors, during the rehab. Deals done we settled on finished for $100,000, ARV $198,000 :o nice right! Ok, now I am renting this for $1175 per month and pay my father inlaw a portion say $600 No interest! and I cash flow $400 after insurance, RIDE THE WAVE!!!!? or Question How do I get my equity out of this? Go to a bank get it financed? then do my next deal or do we just keep banking the $400 a month until we have enough cash for a down payment on another deal?
@Brett Wells this not a buy and hold. couple of simple rules. monthly rent / 1%= Purchase price of property. $1175/.01=$117500 cost of property. Half your rent goes to expenses. $587.50 is for mortgage service. Why does half go to expenses. Property tax, insurance, vacancy, property management,repairs, capital expenditures (roof, etc). You are getting 7% on your money I try to get 10%. You have around $84000 of equity to use after selling expenses. $200000*.08 selling expense=$184000-$100000= $84000 net.
Investor · Tucson, AZ · Member since 2017 · 208 posts · 235 votes
7y
If I understood that correctly with the "No Interest!" comment, are you just paying back your father-in-law principal only payments? Basically, at $600 a month with principal only payments you'll have a free and clear house in under 14 years. Unless of course you have some arrangement with your father-in-law to refinance, it seems like that would not be in your best interest to take a 0% loan and refinance at market rates. Of course there are a lot of things to consider, like using the equity to expand to other projects.
@Andrew Kiel, Thats what I was considering free and clear in a short time, with cash flow. I have yet to see how I can get the equity to expand to the next project.
London · Member since 2019 · 722 posts · 386 votes
7y
If you father-in-law set you up and is experienced, have the conversation with him. Show him you want to learn. He seems to want to share.
You have a zero-interest loan and you are building equity with each payment. I would not be in a rush to sell or refinance. If you leave it alone for a few more months while you tap into what your father-in-law knows, all will be fine. You can always refinance or sell later.
In the meantime, you can learn what it takes to find your next deal. Having cash and not having the knowledge will lead to a loss of the cash.
Continue to post questions. Engage with people who are further up the road than you. This can be the start of something great. One thing about real estate is it is not a fast game. You need to think long term and enjoy the journey. If you rush, you can easily blow up and go back a decade or more in terms of financial losses and credit impact.