Analyze This Bond For Deed Deal With Me

7 Replies

Hey Y'all,

Have this bond for deed deal on the table that I'm analyzing. I like the terms and this is my first owner financed deal as well as my first potential rental property so I don't want those factors to cloud my judgement. Would appreciate any thoughts or input. Thanks!

Property(s): Two separate 1 bed, 1 bath cottage style houses on four shared lots in a desirable neighborhood for rentals. One is slightly larger in size than the other with an added office room. Non-flood zone. Central to town. Has two long term tenants in there for the last 12, 14 years. Decent condition. 

Owner Financing Terms: 

$120K Purchase Price
$3K Down
$117K Balance - Paid Over 25 Years
$400/month note
0% Interest
No Pre-Payment Penalty - Actually 10% Deduction of Balance to Pay Off at 15years

Unit A:
Current Rent - $650

Monthly Expenses: 
Note: 200
Taxes: 28.71
Escrow Services: 35
Insurance: 100
Property Management- 10%: 65
Maintenance - 12%: 78
Vacancy - 8%: 52
Garbage: 13

Total monthly expenses day 1: 571.71
-65 while self-managed = 506.71


Unit A Current Cashflow: 143.29

Notes: 
Market Rents - Around 700-750
Considering making tenants pay for garbage
Insurance may go up as I have yet to review the policy
Escrow services may be $35 for each property or $35 for both

Unit B: 
Current Rent - $475


Monthly Expenses:

Note: 200
Taxes: 28.71
Escrow Services: 35
Insurance: 100
Property Management- 10%: 47.50
Maintenance - 12%: 57
Vacancy - 8%: 38
Garbage: 13

Total monthly expenses day 1: 519.21
-47.50 while self-managed = 471.71


Unit B Current Cashflow: 3.29

Notes:
Market Rents - Around 650-675
Considering making tenants pay for garbage
Insurance may go up as I have yet to review the policy
Escrow services may be $35 for each property or $35 for both

Thoughts? Would you do this deal?

Bond for Deed must be French Law.. never heard that term in my 44 years of real estate.

I am assuming its a debt instrument like a mortgage or deed of trust.

Zero % financing is great.. as long as your not paying double what its really worth.

with those terms it leads me to believe that the seller is tired of managing this and the management could be Hi touch lots of work.. so if you think your ready.. that s a pretty decent deal in my mind.. Again as long as your not pay so far over market..

PS I would start a new thread and title it ..   Help me with this owner finance deal !!

bond for deed if I have not heard of this I would think the vast majority unless they are LA agents or investor have not heard of it and are confused with your title..  Just sayin..

@Jay Hinrichs just made a new thread - https://www.biggerpockets.com/forums/88/topics/575...

Bond for deed is the term in Louisiana but I believe it is the same as land contract in other states. 

Landlord wants to retire due to injury. Houses are in decent shape. Local market puts a duplex at around the $120K range. So it's fair in that sense. 

Thanks for the input!

Hello @Courtney Fricke , yes, bond for deed is the same as what's called a land contract in other states.  You should be able to cut that insurance cost.  All properties, everywhere, are in a flood zone.  What you mean is the property is in flood zone X (least likely to flood, flood insurance not required).

My concerns are:

1. What type of construction are the structures?  (Brick, wood frame, cinder block, etc.?)

2. What is the condition of the big ticket items? (roof, mechanicals, exterior siding and fascia)

3. Get the properties inspected.  I always recommend it for your first few purchases.  You will learn what to look for and you can consider it tuition.  With experience, you won't need to accept that expense on every purchase, but when you are first starting, it is worth every dollar.  

A key point here; don't let the inspection kill the deal!  Unless they find something major that the seller is unwilling to negotiate.  The inspector will find and make note of every little imperfection.  It's normal that they will have a laundry list of nit picky things.  You are getting the inspection to find the big things that you don't know to recognize yet.  That's how you can avoid most unpleasant surprises that come from learning the hard way.

@Robert Leonard Thanks for the input!

Flood zone C. Insurance is currently just liability. Not actual landlord policy. Talking with insurance company tomorrow.

Although these are my first rentals and owner finance deal, they aren't my first property purchases. My
Main concern is with the cashflow and scenario rather than the actual properties.