IRR on no money down deal

[Vlad Selsky]

Hi,
First time post here.

I am interested in buying a condo rental property in the Boston area. Mo

st buildings have low owner occupancy so I wouldn't qualify for a traditional loan.

I have another rental condo that is fully paid out. I am cleared to do a reverse cash refi, so I can draw on $275K at 4.125%. I can also draw on another $70K cash savings if necessary.

If I find a property less than $275K, is it a no-brainer to pay for it in full? And having done that, I'm having trouble with my IRR calculator. Assuming initial investment of zero and theoretically selling the property after 5 years, I'm getting a crazy IRR. Here are my net cash inflows: year 1 - 1604; year 2 - 1811; year 3 - 2027; year 4 - 2266; year 5 - 22,325 (these are just some numbers from a representative MLS listing). What is the IRR on this?

Thanks,
Vlad

[Bryan Hancock]

If you have no capital invested you'll still have your time tied up in the project. Nothing in life is free no matter how much you parse the data. Even arbitrage scenarios have time from the trader involved.

The most reliable indicator to compare investments to me is to compare dollars generated relative to time invested. Your time is presumably worth a lot so you may consider using that to impute value to what in theory is zero investment.