To help a friend - First deal?

7 Replies

Hi BP,

I am looking for my first deal and here at my current job I have a very close friend who lives in a 2bd 2ba apartment in San Diego. She has been wanting to move out for years now because she needs a bigger place and feels stuck with the whole process and a little tight on the $$$.

She is currently paying $1,229.49 for her mortgage (incl. taxes) and $200 more to the HOA on her property. She is looking for a 3bd in the same area.

Her current home is valued as-is at $265,000, she bought it for $259,000 and owes $156,000 to the bank.

Is there an opportunity here for her and me? Could I help her get the bigger place she wants while making this my first (profitable) investment deal?

Thanks!

D.

How would you expect to profit from your 'close friend" without taking money out of her pocket. If she wants a bigger place, and can afford it, she needs to sell this place at full value, then buy the larger place. If your numbers are correct she's got about $100k equity.

Hi @Wayne Brooks , I know i would have to take money from her in some way and we are fine with that. At the end, the goal is to get her into the place she wants for the monthly payment she is currently paying.

I was hoping for some advice as to how I could make this work in a way that we could both benefit. I get $ or a property and she gets the bigger place she wants for the $ she is currently paying.

If you are good friends, you would help her find a good realtor to sell for maximum value. She is not a desperate nor motivated seller to the point where she needs to or is willing to take a loss on her property. She's not at all underwater and can easily sell for above her loan amount. It looks like any gain you think you might get on acquiring the property under market value will come at her loss. That doesn't appear to be a win/win. I know you'd like to win a deal and help a friend, but a "real" friend would help them get maximum value out of her property on the open market instead of considering deals where you offer a discount on the market value... You also omitted potential rent and other things like tax/ maintenance/ vacancy for us to tell you where you would need to be in order to be profitable... market price alone can't tell us that.. Again, you can offer them whatever you want, but just know that I wouldn't want to be your friend if you were not trying to help me get the most money possible. You're friend is only stuck because they haven't hired a realtor to list their property. that's all..

If her home is valued at $265k, then as her close friend, don't you think that she deserves $265k? Not to be harsh, just being real.

The only way she makes $ and you get a property is if you buy the house from her for $265k (in my opinion).

So the question you need to ask - Will this place cash flow at a purchase price of $265k?

@Jeff Bridges Thanks.. I do realize helping her would involve some kind of penalty for her if i am looking to make anything on it. You are right, the best idea would probably be to just help her realize the equity she has so that she can get motivated to do something about it.

@Scott S. I understand. I was just wondering if there was an opportunity for both of us on this that I hadn't thought of. I guess the way I posted the question didn't explain that. Thanks anyway!

@David Adler I would agree with what @Scott Swink said and the others have said about her getting maximum value and questioning whether if you were the person to pay full price would it be cash flow positive, I think that would be the only win-win here but that's just my two cents. Good Luck!