Is this an enticing deal for investors?

Question

I am looking for investors to come into a cash deal with me. Minium investment is 25k, the annual return would be 10% locked in for 3 years, after 3 years you get 100% of your initial investment back.

Does this sound like something I could get people to be interested in?

Joe Villeneuve · Answer

@Mohammed Rahman's answer still applies.

Roanld Pretzeus · Answer

Account Closed It would be a single-family home.

Account Closed · Answer

A lot of equations go into buying a SFR. I presume you plan to make it a rental. Let's say you bought a $200,000 house. You use the $25,000 for the down payment. Since a lender wants 20% down plus closing costs that's going to be around $200,000 times 20% which is $40,000 and then add closing costs so randomly $45,000.

So you need $45,000 and are getting $25,000 where does the other $20,000 come from?

Once you have the property, If you have a vacancy it can take a month or two of lost rents plus the money to prepare the unit for re-occupancy. Who pays for this? The investor?

Roofs need to replaced from time to time, heat, water heaters, appliances, etc have to be taken care of. Who pays for these?

You bought for $200,000 and you decide you are losing money and want to sell after 3 years but the market is normal and your property hasn't gone up in value. So, you put it on the market for $200,000 and you find a buyer who wants help with an FHA loan so you pay $2,000 in concessions, the realtor charges 6% ($12,000) and closing costs are $2,000 give or take. Not to mention you have to put a couple of thousand into fixing the property up again, so you net somewhere around $182,000. Your payoff is somewhere around $159,604 after 3 years at 7% interest.

That means you are paying off $159,604 (the money you borrowed from the bank) with $182,000 you are getting from selling, so you have $22,396 and you have to pay back the $25,000 for the investor.

You find yourself short $2,604 and have to come up with that to add to the $22,396 to pay off the investor.

So, you’ve got 3 years of your life into tenants, toilets, and trouble and have no money to show for it.

So no, I don't think it's a brilliant idea. For you or for the investor.

Greg R. · Answer

Cart is wayyyy ahead of the horse at this point. You need to first develop a competent plan that makes sense, then start thinking about how to attract investors. Not the other way around.

Eliott Elias · Answer

Depends on who you talk to

Roanld Pretzeus · Answer

@Mohammed Rahman Thank you for the response, I am still building my play book I am most just looking to see if these numbers sound good assuming that the project hits all the numbers it needs for this to be a safe and profitable deal.

Mohammed Rahman · Answer

Hey @Roanld Pretzeus - if you're presenting the deal in this manner, then no it doesn't sound enticing at all. You haven't shared any of the details, your background, or the kind of expenses/income you're looking to target with this project.

10% might be a good return for one person, and bad for another.

Scott Mac · Answer

This post seems like it might be skirting an SEC advertising violation.

I'm not an SEC attorney, but maybe someone practicing in this area could clarify if it is or isn't.

Is this an enticing deal for investors?

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