2 good deals - choose 1 or do both?

[Audrey Blotz]

Happy Thursday! 

I’m in the great spot of having found a couple of good deals and naturally I want to do both, but would like some input from more seasoned investors. My husband and I just sold a rental property in WA state so we have about $85k to invest. 

Deal #1 - off market property with studio ADU (kitchenette has a sink only, no fridge or oven). Using seller financing at $450k purchase price, $65k down, 4.9% interest with 5 year balloon. Plan to rent main house (2500sq ft) long term and MTR the ADU. CoC about 5% initially but could possibly MTR the main house in the future. Pretty good appreciation potential.

Deal #2 - MLS property using conventional loan with purchase price of $240k, 10% down, 7.5% interest, will need about $12-15k in updates/rehab. Also has a 2/1 ADU with full kitchen. Would rent main house (1600sq ft) long term and ADU as midterm. Great appreciation potential! CoC would be about 25%.

The first deal is also through a family member so that always clouds the water a bit. About to sign purchase agreement with them when we came across the 2nd deal yesterday. Should I walk away from the first property or try to raise private money to make both deals happen? 

Thanks for any insight! 

[Henry Clark]

You have the upside covered.  Now look at the downside.  3 scenarios. Each property just by itself.  Both properties together.  

Run what ifs:

1.  Renter A quits paying for xx months

2.  Unit B has unexpected capex of $xx,xxx

3.  Family members needs money now after deal is done.  Impact of refinancing? 

Compare the risk reward between the 3 scenarios.  Can you handle?