I was not looking to add anymore properties this year. First, I am broke. I spent everything I had in 2014 and anticipated spending 2015 fixing up the properties I purchased and boosting rents. Second, I thought I had maxxed out my ability to finance deals. The persons who had previously helped me finance deals were no longer in a position to assist me in financing the purchase of a property.
All that being said there was a triplex I had my eye on for a while. It was on Homesearch. It had been auctioned three or four times with no bidders hitting the reserve. I convinced my parents to bid on the property. I figured I could manage it for them (I have a small management company) and it would be a good deal all the way around. They won the auction. I really liked the property and it was bugging me that I could not get some sort of equity stake. I thought about it a lot and contacted a friend who liked to hold Private Mortagages back by Real Estate. He did not like the headache of tenants. He did like the returns from holding mortgages (compared to keeping your money in a bank). I told my parents that I would buy the Triplex from them and give them $1500 for purchasing the property for me. I convinced my friend to buy the property from my parents and in turn I would take out a mortgage with my friend.
Here are how the numbers broke down...
Purchase Price $58,000 (+3400 closing +1500 parents) = $62,900
Going to invest $10,000 into the triplex
Square Footage 2300
All Block Construction ( with wood frame houses/structures I use the 50% rule. With block I tend to go with 45% )
Rents will be about $0.80 a square foot monthly or $9.60 annually.
Total Rents = $22,080
Expenses (45%) = $9,936
EGI = $12,144
Mortgage = $60,000 @7% interest over 12.5 years. Payments of $601 a month for 12.5 years.
601 x 12 = $7,212
NOI = 12,144 - 7,212 = $4,936
I am pretty stoked about this deal. The area the subject property is in will not appreciate much but it should cash flow for years to come. Deals like this do not come around too often. No money down and I will be cash flowing almost $500 a month. Win-Win for everyone involved in the deal.
That is awesome! There is something to be said about persistence and creative thinking. Your desire lead you to a successful solution. Thank you for posting. This is great motivation.
The other thing learned is that when a great deal comes along you must take it. As I see it you will have $12,900 into the property with cash flow of $4,932. You are cash flowing $137 per unit.
Nice. If you refi that after it seasons, cash will really start to fly.
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