complicated interesting deal. Does it sound good to you?
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
---------------------------------------------------------------------------------------------------------------------------------------
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