Any chance for another purchase?

5 Replies

Hi all,

We are closing in our 2nd SFR in 1 week; all of my available investment capital is being used for down payment/cc for that deal.

However, I've come across another property that I'd like to run by you for your opinions on how I may get it financed.

3 bed/2 ba, 1800 sq ft, single carport, appliances stay, lg fenced yard
Motivated seller

List: $64,900
Discount: 20% ($13,000)
Purchase: $52,000
Percent down: 5%
Down payment: 2,600
Make ready repairs: $11,000
Amount Financed: $60,400, 30 yr, 5%
Monthly mortgage: $324.24

Monthly rent: $850 (median for area is $900)
Vacancy: 10%
Monthly NRI: $765

Monthly Expenses
PM: $85
Leasing costs: $35.42
CapEx: $38.25
Utilities: $25.00
Property taxes: $108.33
Insurance: $27.08
Maintenance reserve/other: $20.83
Total: $339.92

NOI: $425.08/mo
Mortgage payment: $324.24/mo
Net Cash Flow: $100.84/mo

Annual cash flow: $1210.12
Annual debt paydown: $891.00
CoC return: 47%
Total return (excludes appreciation): 81%

I had to make some assumptions as I don't know how much, if any, I would have for a down payment, I'm not sure what interest rate I'd have depending if I went conventional vs seller financing vs etc.

Thoughts on potential ways to make this happen if I don't have money to bring to the table or don't want to pursue a conventional loan? I'm a total newb when it comes to creative financing!

Is it ok to have my agent contact the seller's agent to inquire about their openness to alternate financing options?

Thanks for your time!

@Justin Sandall  Borrowing $60k to make an (uncertain) $100/m seems a bit ho hum to me, especially because your finances are already stretched. 

If I was your Lender, I would be asking you for a larger deposit, and/or charging you higher interest rate than 5%. Good luck finding one that doesn't!

Given your circumstances, I also think your Maximum Allowable Offer needs to be a bit more "creative" than (only) 20% discount off (a random?) list price. I will not be impressed if all those figures were handed to you by the Sellers Agent - it smacks of "they saw you coming"! Cheers...

Thanks for the reply Brent.

The expenses are all estimated (likely overestimated) and the comps in the area seem to be consistent with a FMV of $65,000, thus I took 20% off that. I certainly could start at even more of a discount. I think the $100/mo of cash flow is near worst case scenario, in reality I expect it will be more (as has been the case with our other property). I try to overestimate expenses in my deal analysis.

I certainly would like more cash flow and could probably get a rent of $900 rather than the $850 used above. I probably won't have more to put down; are there any creative financing options that could be a good fit? 

@Justin Sandall you might want to consider for thin deals to do a "JV with the seller"

You can make 10,000 by helping the seller that has some equity by 

-buying it subject to the existing financing 

-getting title 

-improving the property and 

-reselling it 

-and making a JV fee

If you don't have the money to improve the property to reseller get a private lender to lend you the money

$38.25 capex, $20.83 maintenance. YES! $25.00 for utilities also seems really low if you're responsible for any of it. 

Unless this property was brand new, I highly doubt this would be possible. 

Agreed, seems maintenance/capes are unrealistically low.

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