Assume a Loan - Negative Cashflow?
Member since 2020 · 13 posts · 3 votes
Assume a Loan - Negative Cashflow?
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
1yWhat if home prices drop? That does happen - then you have negative equity and negative cash flow.
7e investments53 Reviews
26 Replies
So the plan is to earn NEGATIVE $300/mo on $75k instead of a positive $300/mo GUARANTEED return with a bank CD. IF, you self manage for free, and nothing breaks, and there’s zero vacancy?
Sounds like a great idea, with the best of intentions, what could possibly go wrong?
I guess, if you were unemployed. and wanted to pay $600/mo to buy a job. As long as your crystal ball told you a tenant would move in day 1, stay for 7 years, and nothing would break.
Don’t get me wrong. I’ve bought negative cashflow deals. But I paid under market, had a 15 year loan, included Managment fees, knew I could raise rent, values would rise, and I was negative less than the principle portion of my payment.
- Member since 2020 · 13 posts · 3 votes1y
Quote from @Bill B.:
So the plan is to earn NEGATIVE $300/mo on $75k instead of a positive $300/mo GUARANTEED return with a bank CD. IF, you self manage for free, and nothing breaks, and there’s zero vacancy?
Sounds like a great idea, with the best of intentions, what could possibly go wrong?
I guess, if you were unemployed. and wanted to pay $600/mo to buy a job. As long as your crystal ball told you a tenant would move in day 1, stay for 7 years, and nothing would break.
Don’t get me wrong. I’ve bought negative cashflow deals. But I paid under market, had a 15 year loan, included Managment fees, knew I could raise rent, values would rise, and I was negative less than the principle portion of my payment.
Bill, sorry no - I would put $0.00 down to assume it.
Similar priced townhomes are about $300k and would require the 25% down.
Also, it is a new construction home so likely very low CapEx. I would be self managing so would Buying a job in that aspect
Sorry, I misunderstood when I read this part
“I can put 25% down and get a $300k Townhome to cashflow near 0.”
And thought you were assuming $225k on a $300k townhome.
You could/should ask for at least 4-5% off if neither of you pays realtors commissions. If they sell to someone else they’d pay $12-$15k in commissions and only net $285-$288k.
If they owe near market value they’re really not in a position to sell. They must have put $0 down themselves or the market is falling and you may not want to buy there. They should have put at least 5% down and earned 4-6% in appreciation over a couple years. Giving them some 10% breathing space.
- Member since 2020 · 13 posts · 3 votes1y
Quote from @Bill B.:
Sorry, I misunderstood when I read this part
“I can put 25% down and get a $300k Townhome to cashflow near 0.”
And thought you were assuming $225k on a $300k townhome.
You could/should ask for at least 4-5% off if neither of you pays realtors commissions. If they sell to someone else they’d pay $12-$15k in commissions and only net $285-$288k.
If they owe near market value they’re really not in a position to sell. They must have put $0 down themselves or the market is falling and you may not want to buy there. They should have put at least 5% down and earned 4-6% in appreciation over a couple years. Giving them some 10% breathing space.
Bill,
Definitely should have been more clear with that sentence. There wouldn’t be any realtor commissions on the deal. My thought was going to be to ask them to pay any loan assumption costs. But could ask for some more off.
You are 100% correct / they did put 0 down when they bought 2 years ago and do t have the room to sell. The area has a ton on economic development going on. The property is 5 minutes from my home and the fastest growing town in the fastest growing county in NC so I think there is future appreciation and increased rents down the road.
The principal is $386/mo and the loss would be $302/mo
So you don’t think it would be a terrible idea to assume it? I could use the tax write offs too lol
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes1y
Quote from @Christopher Bell:
I might be crazy but…..would you?
Scenario:
Have a chance to assume a loan that has 28 years remaining, 5% interest, and in a very quickly growing suburb of Raleigh NC.
The townhouse would lose approximately $300/mo. Total payment is $2150/mo and market rent is $1850-$1900/mo.
Loan assumption Is essentially at market value $298k, but the $0 down outside of closing cost on loan assumption are what’s hooking me. I can put 25% down and get a $300k Townhome to cashflow near 0.Also, the family is looking to buy a SFH and would be using my wife (realtor) to buy. Therefore, we would make about $8000-$12000 in commissions from the purchase.
Am I crazy to be considering this?
yes this makes no sense why you would buy a property at market value that is not cash flowing. If the deal was below market value then I would consider it, but what is the benefit?
7e investments53 Reviews- Member since 2020 · 13 posts · 3 votes1y
Quote from @Chris Seveney:
Quote from @Christopher Bell:
I might be crazy but…..would you?
Scenario:
Have a chance to assume a loan that has 28 years remaining, 5% interest, and in a very quickly growing suburb of Raleigh NC.
The townhouse would lose approximately $300/mo. Total payment is $2150/mo and market rent is $1850-$1900/mo.
Loan assumption Is essentially at market value $298k, but the $0 down outside of closing cost on loan assumption are what’s hooking me. I can put 25% down and get a $300k Townhome to cashflow near 0.Also, the family is looking to buy a SFH and would be using my wife (realtor) to buy. Therefore, we would make about $8000-$12000 in commissions from the purchase.
Am I crazy to be considering this?
yes this makes no sense why you would buy a property at market value that is not cash flowing. If the deal was below market value then I would consider it, but what is the benefit?
My thought would be to get a townhouse with a 5% interest rate, in the fastest growing county in NC, in the fastest growing town in that county, for no $ out of pocket.
The benefit is that the area has a ton of growth here and might be a little speculative but there are billion dollar economic expansions happening in the town.
Also, my wife gets to help them buy a home and recoup about $10-$12k from that.
- 1yBenjamin AakerPro MemberRental Property Investor · Brandon, SD · Member since 2015 · 1k+ posts · 1k+ votesDon't bet on appreciation - that is unless you have large cash reserves. You'll be running in the red for a while, so for most, don't buy negative cash flow.
- It's tempting because it's zero percent down and the interest rate is significantly below market. It's tough because you are cash flow negative to the tune of 10k/year for the next 5-10 years until you can refinance. I'd probably do it if I had the 75k to buy it and stick the 75k in a bond/treasury ladder which matures over the next seven and a half years to offset the negative cash flow.
Quote from @Christopher Bell:
I might be crazy but…..would you?
Scenario:
Have a chance to assume a loan that has 28 years remaining, 5% interest, and in a very quickly growing suburb of Raleigh NC.
The townhouse would lose approximately $300/mo. Total payment is $2150/mo and market rent is $1850-$1900/mo.
Loan assumption Is essentially at market value $298k, but the $0 down outside of closing cost on loan assumption are what’s hooking me. I can put 25% down and get a $300k Townhome to cashflow near 0.Also, the family is looking to buy a SFH and would be using my wife (realtor) to buy. Therefore, we would make about $8000-$12000 in commissions from the purchase.
Am I crazy to be considering this?
To me, negative cash flowing properties are stressful.
Still thinking out loud
Averaging over the years, this amounts to about 4% rent return + 3% appreciation for a total return of 7%, which is not a great deal, but better than the 5% interest rates. So your total return over the first seven years is approximately 4% from your bonds + 2% of the property value (or about 6000/year). So your total return on the 75k is about 9k/year which is about 12% total return which is middling for an active real estate investment. I think I would need gross rents to be in the 9-10% range (rather than the 8% you are estimating now) to make it work. Its tempting with zero down, but you are essentially paying the downpayment spreadout over the next 10 years instead of all at once. - Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes1y
What if home prices drop? That does happen - then you have negative equity and negative cash flow.
7e investments53 Reviews - Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes1y
The numbers and the situation doesn't make any sense. They bought at $300k 2 years ago in the hottest town in NC. They've been paying on the note for 2 years. They owe $298k, which according to you is essentially market value. So there's been no appreciation on this townhouse for the last 2 years? If it was just keeping up with inflation, you should have about $10-15k in equity in it right off the bat since market value ought to be $310-315 with nothing but CPI adjustments. Then you are going to lose several hundred dollars a month on rent self-managing. And there's no guarantee they can even buy another home, so you're really counting chickens with the real estate commission deal.
This sounds like a very bad idea to me. I think you are overestimating how "hot" this market is, if there's been no growth on value of an essentially brand new townhouse in 2 years.
Skyline Properties - 1yDon KonipolBusiness MemberInvestor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votesAll improved real estate properties have long term “depreciation”, not in the accounting sense but in the real sense that systems wear out and need replacing (HVAC, roof, flooring), the property requires updating to be competitive, etc. While it may be in ten years time that the roof needs to be replaced, the roofing component of the property is using 10% of it life every year and hence the true cost of this depreciation should be borne each year, not all at once in 10 years. If not recognized as a yearly expense, the owner will be unpleasantly surprised when they go to sell and the offers are $20,000 under what a property with a newer roof would bring.
Quote from @Christopher Bell:
I might be crazy but…..would you?
Scenario:
Have a chance to assume a loan that has 28 years remaining, 5% interest, and in a very quickly growing suburb of Raleigh NC.
The townhouse would lose approximately $300/mo. Total payment is $2150/mo and market rent is $1850-$1900/mo.
Loan assumption Is essentially at market value $298k, but the $0 down outside of closing cost on loan assumption are what’s hooking me. I can put 25% down and get a $300k Townhome to cashflow near 0.Also, the family is looking to buy a SFH and would be using my wife (realtor) to buy. Therefore, we would make about $8000-$12000 in commissions from the purchase.
Am I crazy to be considering this?
Hence, thinking that mortgage payments which even if they include tax and insurance escrows are the only expenses is incorrect. Overall, property depreciation average at LEAST 2% of value on an annual basis. So the real expenses associated with owning a $300k property is about $6,000 in “depreciation” in addition to all other expenses.
Further, unless the property is rented long term to a credit tenant these will (probably) be tenant turnover. A landlord would.d have to be very lucky indeed to own a property long term and never have a tenant do more damage than the security deposit amount. But even so, wear and tear items are not covered by a security deposit. If a tenant has been in a property any significant amount of time, it’s more than likely painting will be needed to make the property competitive with other rentals and to obtain the maximum rental amount. In all but the hottest rental markets it’s also likely that there will be times when the property is vacant. Therefore vacancy expense should also be calculated.
Depreciation is sometimes disguised by inflationary increase or other increase in property values. But the two should be considered separately. In the given subject property, the $300 monthly “loss” (should be somewhat modified for the amortization amount of the payment) would actually be closer to $1,000 when depreciation and vacancy loss is taken into account.
Offsetting this is property price appreciation. This is an area where hindsight is 20/20 and everything is obvious only after it occurs. And while IN GENERAL real estate prices have appreciated for the last 80 years, a friend of mine told me that his family home in Detroit purchased by his parent in 1961 for $20,000 was sold for $3,000 in 2010.
The second “offset” is rental rate increases. Obviously if rental rates were to double over the next 10 years the profitability of this investment would look very different.
Here’s the bottom line. The purchase price of this property is not at investor pricing; it’s paying retail for the benefit of “nothing down”. But two years of negative cash flow, especially if repairs are needed, maintenance is accounted for, or should vacancy occur, and the investor would be “in it” for the down payment amount anyway.
Btw, do you mean you would actually assume the loan; with qualifying with the lender and accepting personal liability? Or do you mean doing a “subject to” deal? - Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes1yI don't see where you stated what you would do with the property
Quote from @Christopher Bell:
I might be crazy but…..would you?
Scenario:
Have a chance to assume a loan that has 28 years remaining, 5% interest, and in a very quickly growing suburb of Raleigh NC.
The townhouse would lose approximately $300/mo. Total payment is $2150/mo and market rent is $1850-$1900/mo.
Loan assumption Is essentially at market value $298k, but the $0 down outside of closing cost on loan assumption are what’s hooking me. I can put 25% down and get a $300k Townhome to cashflow near 0.Also, the family is looking to buy a SFH and would be using my wife (realtor) to buy. Therefore, we would make about $8000-$12000 in commissions from the purchase.
Am I crazy to be considering this?
- Member since 2020 · 13 posts · 3 votes1y
Quote from @Ken M.:
I don't see where you stated what you would do with the propertyQuote from @Christopher Bell:
I might be crazy but…..would you?
Scenario:
Have a chance to assume a loan that has 28 years remaining, 5% interest, and in a very quickly growing suburb of Raleigh NC.
The townhouse would lose approximately $300/mo. Total payment is $2150/mo and market rent is $1850-$1900/mo.
Loan assumption Is essentially at market value $298k, but the $0 down outside of closing cost on loan assumption are what’s hooking me. I can put 25% down and get a $300k Townhome to cashflow near 0.Also, the family is looking to buy a SFH and would be using my wife (realtor) to buy. Therefore, we would make about $8000-$12000 in commissions from the purchase.
Am I crazy to be considering this?
LTR
- Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes1y.
Quote from @Christopher Bell:
Quote from @Ken M.:
I don't see where you stated what you would do with the propertyQuote from @Christopher Bell:
I might be crazy but…..would you?
Scenario:
Have a chance to assume a loan that has 28 years remaining, 5% interest, and in a very quickly growing suburb of Raleigh NC.
The townhouse would lose approximately $300/mo. Total payment is $2150/mo and market rent is $1850-$1900/mo.
Loan assumption Is essentially at market value $298k, but the $0 down outside of closing cost on loan assumption are what’s hooking me. I can put 25% down and get a $300k Townhome to cashflow near 0.Also, the family is looking to buy a SFH and would be using my wife (realtor) to buy. Therefore, we would make about $8000-$12000 in commissions from the purchase.
Am I crazy to be considering this?
LTR
LTR means a lot of capital expenses downline.
- 1yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
@Christopher Bell have done several assumptions, land contracts, etc.
You state property value is $298k, but what is loan amount?
- What would the sellers walk-away with if they sold on market and paid agent commissions?What will happen to property tax & home insurance amounts once you convert to a rental?
Even with 0% down, negative cashflow ONLY makes sense if something offsets it.
If the property has no equity, can't see any value-play.
Logical Property Management4.9460 Reviews- Member since 2020 · 13 posts · 3 votes1y
Quote from @Drew Sygit:
@Christopher Bell have done several assumptions, land contracts, etc.
You state property value is $298k, but what is loan amount?
- What would the sellers walk-away with if they sold on market and paid agent commissions?What will happen to property tax & home insurance amounts once you convert to a rental?
Even with 0% down, negative cashflow ONLY makes sense if something offsets it.
If the property has no equity, can't see any value-play.
Tax and insurance would remain the same - Loan amount is $296k. If they sold with an agent they would walk away with about $280k. My wife is an agent and her getting the commission helping them buy another hose was attracting me because with the commission we get a rental for about the $280k with her commission so more/less below the market value. Plus the commission pads the negative equity for about 2-3 years (assuming 100% vacancy and self managing - which is tight).
It does seem that the general consensus is that it's likely not a very good idea. There is a lot more risk than reward on this deal it appears. I just like the area, see a future in appreciation here, and thought being able to get an asset for $0.00 down and maybe tlose $300/mo in the long run might pan out in 3-5 years. I'm in a position were earning the 4-5% on the current cash can be utilized to offset that $300/mo loss in cashflow.
- Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes1y.
Quote from @Christopher Bell:
Quote from @Drew Sygit:
@Christopher Bell have done several assumptions, land contracts, etc.
You state property value is $298k, but what is loan amount?
- What would the sellers walk-away with if they sold on market and paid agent commissions?What will happen to property tax & home insurance amounts once you convert to a rental?
Even with 0% down, negative cashflow ONLY makes sense if something offsets it.
If the property has no equity, can't see any value-play.
Tax and insurance would remain the same - Loan amount is $296k. If they sold with an agent they would walk away with about $280k. My wife is an agent and her getting the commission helping them buy another hose was attracting me because with the commission we get a rental for about the $280k with her commission so more/less below the market value. Plus the commission pads the negative equity for about 2-3 years (assuming 100% vacancy and self managing - which is tight).
It does seem that the general consensus is that it's likely not a very good idea. There is a lot more risk than reward on this deal it appears. I just like the area, see a future in appreciation here, and thought being able to get an asset for $0.00 down and maybe tlose $300/mo in the long run might pan out in 3-5 years. I'm in a position were earning the 4-5% on the current cash can be utilized to offset that $300/mo loss in cashflow.
I always ask myself, "for the risk and amount of effort, can I do better on this project or by using my time to find a better project. Time is the big unknown, we only know if we were right by looking back. Going into to it is by "best" guess. With my experience, my best guess is find a better project. - 1yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
Quote from @Christopher Bell:
Quote from @Drew Sygit:
@Christopher Bell have done several assumptions, land contracts, etc.
You state property value is $298k, but what is loan amount?
- What would the sellers walk-away with if they sold on market and paid agent commissions?What will happen to property tax & home insurance amounts once you convert to a rental?
Even with 0% down, negative cashflow ONLY makes sense if something offsets it.
If the property has no equity, can't see any value-play.
Tax and insurance would remain the same - Loan amount is $296k. If they sold with an agent they would walk away with about $280k. My wife is an agent and her getting the commission helping them buy another hose was attracting me because with the commission we get a rental for about the $280k with her commission so more/less below the market value. Plus the commission pads the negative equity for about 2-3 years (assuming 100% vacancy and self managing - which is tight).
It does seem that the general consensus is that it's likely not a very good idea. There is a lot more risk than reward on this deal it appears. I just like the area, see a future in appreciation here, and thought being able to get an asset for $0.00 down and maybe tlose $300/mo in the long run might pan out in 3-5 years. I'm in a position were earning the 4-5% on the current cash can be utilized to offset that $300/mo loss in cashflow.
How are they going to walk away with $280K when they have a mortgage of $296k to payoff?
What is the property market value?
It appears they may have to bring money to closing to sell!
If so, why would you bail them out?
If they were to PAY YOU the $16k they'd need to bring to closing, to take it off their hands, NOW you might have something.
$16k / $300 negative cashflow/month = 53 months of the neg cashflow covered.
That's over 4 years. If YOU believe the property will apprecaite, and are willing to gamble on that belief, it MIGHT be worth it to proceed.
Logical Property Management4.9460 Reviews - 1yDon KonipolBusiness MemberInvestor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votesI don’t think your position is necessarily wrong, you just need to do more thorough analysis. You need to establish ROI under various assumptions, such as value increases (or decreases), rent increases, vacancy rates, repair and maintenance, etc. Then utilize a weighted average so as to more heavily weigh the more likely (higher probability) outcomes. Or you could just go by “gut” feel.
Quote from @Christopher Bell:
Quote from @Drew Sygit:
@Christopher Bell have done several assumptions, land contracts, etc.
You state property value is $298k, but what is loan amount?
- What would the sellers walk-away with if they sold on market and paid agent commissions?What will happen to property tax & home insurance amounts once you convert to a rental?
Even with 0% down, negative cashflow ONLY makes sense if something offsets it.
If the property has no equity, can't see any value-play.
Tax and insurance would remain the same - Loan amount is $296k. If they sold with an agent they would walk away with about $280k. My wife is an agent and her getting the commission helping them buy another hose was attracting me because with the commission we get a rental for about the $280k with her commission so more/less below the market value. Plus the commission pads the negative equity for about 2-3 years (assuming 100% vacancy and self managing - which is tight).
It does seem that the general consensus is that it's likely not a very good idea. There is a lot more risk than reward on this deal it appears. I just like the area, see a future in appreciation here, and thought being able to get an asset for $0.00 down and maybe tlose $300/mo in the long run might pan out in 3-5 years. I'm in a position were earning the 4-5% on the current cash can be utilized to offset that $300/mo loss in cashflow.
- Member since 2020 · 13 posts · 3 votes1y
Quote from @Drew Sygit:
Quote from @Christopher Bell:
Quote from @Drew Sygit:
@Christopher Bell have done several assumptions, land contracts, etc.
You state property value is $298k, but what is loan amount?
- What would the sellers walk-away with if they sold on market and paid agent commissions?What will happen to property tax & home insurance amounts once you convert to a rental?
Even with 0% down, negative cashflow ONLY makes sense if something offsets it.
If the property has no equity, can't see any value-play.
Tax and insurance would remain the same - Loan amount is $296k. If they sold with an agent they would walk away with about $280k. My wife is an agent and her getting the commission helping them buy another hose was attracting me because with the commission we get a rental for about the $280k with her commission so more/less below the market value. Plus the commission pads the negative equity for about 2-3 years (assuming 100% vacancy and self managing - which is tight).
It does seem that the general consensus is that it's likely not a very good idea. There is a lot more risk than reward on this deal it appears. I just like the area, see a future in appreciation here, and thought being able to get an asset for $0.00 down and maybe tlose $300/mo in the long run might pan out in 3-5 years. I'm in a position were earning the 4-5% on the current cash can be utilized to offset that $300/mo loss in cashflow.
How are they going to walk away with $280K when they have a mortgage of $296k to payoff?
What is the property market value?
It appears they may have to bring money to closing to sell!
If so, why would you bail them out?
If they were to PAY YOU the $16k they'd need to bring to closing, to take it off their hands, NOW you might have something.
$16k / $300 negative cashflow/month = 53 months of the neg cashflow covered.
That's over 4 years. If YOU believe the property will apprecaite, and are willing to gamble on that belief, it MIGHT be worth it to proceed.
Drew, thanks for the input! They owe the $296k on the townhome. They don't have the money to bring to the table to sell the property. They are starting a family and want to move into a SFH and that's where using my wife to close on a new home would help offset the purchase. My assuming a $400k home (their price range) I could see myself offsetting that negative $300/mo for about 2-2.5 years depending on commission rate.
My gut does say there would be future appreciation and rent growth. The suburb of Raleigh is really growing. But, I’m just trying to be smart about it. - 1yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
Quote from @Christopher Bell:
Quote from @Drew Sygit:
Quote from @Christopher Bell:
Quote from @Drew Sygit:
@Christopher Bell have done several assumptions, land contracts, etc.
You state property value is $298k, but what is loan amount?
- What would the sellers walk-away with if they sold on market and paid agent commissions?What will happen to property tax & home insurance amounts once you convert to a rental?
Even with 0% down, negative cashflow ONLY makes sense if something offsets it.
If the property has no equity, can't see any value-play.
Tax and insurance would remain the same - Loan amount is $296k. If they sold with an agent they would walk away with about $280k. My wife is an agent and her getting the commission helping them buy another hose was attracting me because with the commission we get a rental for about the $280k with her commission so more/less below the market value. Plus the commission pads the negative equity for about 2-3 years (assuming 100% vacancy and self managing - which is tight).
It does seem that the general consensus is that it's likely not a very good idea. There is a lot more risk than reward on this deal it appears. I just like the area, see a future in appreciation here, and thought being able to get an asset for $0.00 down and maybe tlose $300/mo in the long run might pan out in 3-5 years. I'm in a position were earning the 4-5% on the current cash can be utilized to offset that $300/mo loss in cashflow.
How are they going to walk away with $280K when they have a mortgage of $296k to payoff?
What is the property market value?
It appears they may have to bring money to closing to sell!
If so, why would you bail them out?
If they were to PAY YOU the $16k they'd need to bring to closing, to take it off their hands, NOW you might have something.
$16k / $300 negative cashflow/month = 53 months of the neg cashflow covered.
That's over 4 years. If YOU believe the property will apprecaite, and are willing to gamble on that belief, it MIGHT be worth it to proceed.
Drew, thanks for the input! They owe the $296k on the townhome. They don't have the money to bring to the table to sell the property. They are starting a family and want to move into a SFH and that's where using my wife to close on a new home would help offset the purchase. My assuming a $400k home (their price range) I could see myself offsetting that negative $300/mo for about 2-2.5 years depending on commission rate.
My gut does say there would be future appreciation and rent growth. The suburb of Raleigh is really growing. But, I’m just trying to be smart about it.How can they not have money?
How are they going to buy the $400k house?
Your wife should be able to put together a Net Sale sheet to ballpark what they would need to bring to closing to sell.Your goal is to make them an offer you are embarrassed to make!
- You are an investor, NOT a charity or hobbyist!Show them the Net sheet and ask them how much they can afford to pay you to take their problem over.
- If you don't make them face the problem, they won't get serious.Logical Property Management4.9460 Reviews
I wouldn't do it. I invest and live in Raleigh as well, it's a competitive market but there are plenty of deals to be had, this does not sound like a deal at all. A few month's of vacancies, capex or tenant repairs and your wife's commission is wiped out.
- Member since 2020 · 13 posts · 3 votes1y
Quote from @Chad Gray:
I wouldn't do it. I invest and live in Raleigh as well, it's a competitive market but there are plenty of deals to be had, this does not sound like a deal at all. A few month's of vacancies, capex or tenant repairs and your wife's commission is wiped out.
Thanks man - I’m leaning towards the “don’t do it” side. I haven’t done as much residential and switched to commercial the past year and when presented with this the no money down hooked me a little. But, it is a net negative deal at least for several years with more risk and probably worth!
Where in the Raleigh area are you?
- 1yRyan ThomsonBusiness MemberReal Estate Agent · Colorado Springs, CO · Member since 2018 · 1k+ posts · 1k+ votes
@Christopher Bell ALL DAY LONG I would. The amount you will pay down in loan balance will cover negative cashflow. This doesn't even include tax benefits and potential long term appreciation.
If you are confident that your income can support reinvesting $300/month in order to get 10k of principal paydown each year then I would storngly consider this! Cashflow is not everything and is often pennies on the dollar compared to appreciation and loan paydown.
Plus - set aside some of the downpayment you would have put down on another investment and it can be your reserve fund since you are into this property for $0 down.
The Assumable Guy544 Reviews
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