Buy and hold deal or bust?

[Robert Crowley]

I’m looking for properties to invest in using OPM and I’m interested in buy and holds to rent. For example, I found (what I think to be a deal if bought with a mortgage) for 1.2 mil, in a stable and growing market in a popular metropolitan area. It is 100% occupied with four units, each nice 1/1s that can be rented for $2500 a month for a total of 10,000 gross rent a month and $120,000 annual. After a good 30 year fixed mortgage, property taxes, cap ex, etc. would leave a gross annual income of $30,000 a year. If it was a 50/50 split between a private investor and I, that’s $15,000 each. Or if the deal had to be sweetened with a 75/25 split- $22,500 for the investor and $7500 for myself. Does something like that even make remote sense for a private investor? Are private investors interested in taking out mortgages to fund deals or does it only make sense for them if the deal works as a cash buy? Any advice is greatly appreciated as I’m only just now diving into my attempt to find real estate deals.

[Andrew Johnson]

Robert Crowley So let’s talk out loud and do some simple math. I’m the “investor” and you want $400K of my money (25% down) for your $1.2M deal where I assume 100% of the risk and you get 50% of the profits. For that privilege I get a *projected* return of $15K per year. That’s a whopping 3.8% cash-on-cash return.

I can’t imagine any investor sitting on $400K would find this appealing but you might get lucky 🤷🏻‍♂️