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Updated over 7 years ago on . Most recent reply

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Karl Kaeser
  • Bartlett, IL
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complicated interesting deal. Does it sound good to you?

Karl Kaeser
  • Bartlett, IL
Posted

So I have a slightly complicated deal that I'd like to get your advice on if it seems doable. I'm purchasing a 2 unit building from family members (there are 3 owners who were given the property in a revocable trust from my grandma). Here is the proposal I wrote for them. The purchase price of the building is $129k as-is. It needs $16,000 worth of repairs to the lower unit to be rent ready, the upper unit will be rented by my aunt at a fixed rate for the next 5 years. The ARV is in the $180-$200k range. They are owner financing the deal as follows:

Proposal for Cicero House (Divided equally among Greg/Sharon/Laura)

$129,000 purchase price AS-IS

$43,000 each to Greg/Sharon/Laura

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Loan Information (Greg and Sharon)

$3,000 each for Greg and Sharon up front

Loan amount is $40,000 each for Greg and Sharon

3% Interest rate on 30 yr loan for first 5 years

FIRST 5 YEARS (first 60 payments)

30 yr $40,000 loan at 3%

Payments are $168.64/month ($57.53 to interest/111.11 to principal)

AFTER 5 YEARS (next 84 payments)

After 5 years, the remainder of the loan ($33,333.40 each) converts to a second loan

7 yr $33,333.40 loan at 3%

Payments are $440.44/month ($43.61 to interest/$396.83 to principal)

*I have the option of paying off or paying extra on the loan at any time

------------------------------------------------------------------------------------------------------------------------------------------

Loan Information (Laura)

Loan amount is $43,000

3% interest rate on 5 yr loan

$772.65/month payment to Laura ($55.98 to interest/ $716.67 to principal)

Laura’s rent payment and living terms

Laura’s rent payment (including water/heat) will be fixed at $1,172.65/month for a 5 year lease

$772.65/month comes from the payment she gets from me every month

$400/month comes from her

Rent is locked in at $1,172.65/month for the next 5 years, it will never increase

Here are the financials for first 5 years:

cicero MONTHLY YEARLY
Income Expense income expense
Rent 1st floor (includes water/heat) 1200 14400
Rent 2nd floor 400 4800
equity gain on loan 222
Mortgage (on 40k-$190/30, $266/sue, $295/15@4%) 337 4044
Taxes 655 7860
Insurance 0 0
water 120 1440
heat 60 720
snow (tennant) 0 0
grass (tennant) 0 0
garbage (included in taxes) 0 0
HOA 0 0
vacancy (8% of one unit) 99.6 1195.2
capital expenditure (5% two units) 118.6 1423.2
repairs (5% two units) 118.6 1423.2
prop management (10% of 1 unit) 120 1440
TOTAL INCOME/EXPENSES $1,600 $1,629 $19,200 $19,546
Cash flow -$29 -$346
income including equity gain ($772) 2372 28464
equity gain (laura rent) 772 9264
NET GAIN $965 $11,582
Actual Cash flow (not incl prop mngt) $91 $1,094.40

These are the financials for the following 7 years:

Rent 1st floor (includes water/heat) 1200 14400
Rent 2nd floor 1172 14064
equity gain on loan 599.64
Mortgage (on 40k-$190/30, $266/sue, $295/15@4%) 643.74 7724.88
Taxes 655 7860
Insurance 0 0
water 120 1440
heat 60 720
snow (tennant) 0 0
grass (tennant) 0 0
garbage (included in taxes) 0 0
HOA 0 0
vacancy (8% of one unit) 99.6 1195.2
capital expenditure (5% two units) 157.2 1886.4
repairs (5% two units) 157.2 1886.4
prop management (10% of 1 unit) 120 1440
TOTAL INCOME/EXPENSES $2,372 $2,013 $28,464 $24,153
Cash flow $359 $4,311
income including equity gain ($772) 3144 37728
equity gain (laura rent) 772 9264
NET GAIN $1,731 $20,771
Actual Cash flow (not incl prop mngt) $479 $5,751.12

This is my first deal so any help would be GREATLY appreciated!!

Thank you

-Karl

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