Financing my 2nd deal

1 Reply

I am new to the site, looking forward to learning from the BP community!

First, a bit of background: I am a young professional currently employed as a senior associate scientist in research and development for a large company. One of my co-workers is an experienced real estate investor in our local market (CT). We decided to partner along with 2 others to form an LLC focused on buy and hold rental properties, specifically condos. I am the president of the condo association I live in, which both my co-worker and I own primary residences in. I developed a relationship with the original condo association developers who still own 10 units. They are nearing retirement and liquidating their real estate holdings.

For our first deal, we purchased a 1 bed / 1 bath condo, owner financed (10% down, 4.5% interest, 5 year balloon) and put ~$6k into new appliances and cosmetic repairs. It is currently rented for $1,100. After all expenses we expect to profit ~$200 per month. 

Our second deal is in the works. 2 bed / 2 bath condo which was purchased at a foreclosure auction. We're trying to decide on paying cash vs. establishing a line of credit. Any input on when to do that as a new business would be appreciated. 

@Andrew Monahan Sounds like you are making good progress, keep up the great work. I would recommend using a line of credit when possible. With interest rates still relatively low, it makes sense to use other peoples money to help make you money. You will want to run the numbers with the added interest rate. Though I can assure you that your cash on cash return will be significantly higher following through on this process. There are tax benefits/deductions for paying on interest. I would recommend further digging on the tax rules for maximum perks :) 

Use other peoples money when possible. Use your own cash when all else fails.

Cheers!

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