Updated 3 days ago on . Most recent reply
Property allows access to equity, minimal cash flow. Unique situation, Guidance?
Hello everyone,
I am asking for all opinions of the following deal. It's a bit different than a standard deal and I am having trouble figuring out if I want to take it or not.
The home is in Charlotte, NC and is a 3 bed, 2.5 bath, 1450 SQFT single car garage built in 1996. It was purchased for $318,000, $47,000 down at 7.125%. Located in the vicinity of University of North Carolina at Charlotte.
Improvements:
- Roof (2016), Gutters (2023), dishwasher (2024), new toilets' (2024), outdoor lighting (2024), new carpets (2024), two bathrooms remolded (2023).
No outstanding issues with the property that we are aware of. The house is up for sale for $320,000 but has not sold in 4 months. We attribute this due to slow market and interest rates.
Charlotte is a growing city year over year.
Unique situation: The home was purchased by my mother/father in-law in 2022. It was lived in by my brother in law and wife for 2.5 years. From the start this was going to be a real estate investment. My brother in law would live in it for 5-7 years and conduct home improvement then move out and manage. Long story short, my brother in law's plans shifted and they moved out and no longer have an interest in being landlords. My mother/father in law still own the property and are attempting to sell but see it as a waste.
My wife and I already own one small time rental with the intent to grow before having kids in 4-5 years. It cash flows $400 a month. Our household income is $210,00 and we do not take money from the real estate investment.
We had the idea to reach out to her parents (who own the property) and offer to join and take over management. As it stands, we are looking to place an additional $30,000 down and refinance to 6.5%. This is the lowest rate we've found since we won't be occupying it.
That leaves $232,000 on the mortgage financed at 6.5% with an immediate equity of about $80,000 (between in laws and us). After plugging this property into our spreadsheet, the monthly cash flow is break even until rates can come down.
The interesting part: The in laws view this an an investment into our future and don't particularly need the $50,000 they put into the house back. They would rather us use the equity and grow to more properties in the future. They will also spit all costs 50-50 for this property.
My wife and I have discussed the risk associated with minimal cash flow having to subside this property when issues arise. We are okay with that. We do not currently live in Charlotte but we are both from there. We likely will move back in 5 years. The in laws would be our touch point with the property as they live 15 minutes away. They agreed to this.
My wife and I have discussed the risk associated with minimal cash flow having to subsidize this property when issues arise. We are able to do that.
I would request a new inspection prior to joining them on the house.
The proposition is:
Would you take a break even property and buy in with $30,000 to have access to $80,000?