All Forum Posts by: Stephen Groves

Would you take a deal that results in zero cash flow but doesn't require you to put any money down?  I have a 4-plex that I am considering buying from the owner.  He has offered to finance the deal and I have negotiated no money down, no closing costs, and an interest rate that is almost 1% lower than the bank.  The negative is he is only willing to do a 20-year loan with me.  Because the loan is shorter, the net result is that I will not cash flow positive, but will at least break even.  This is accounting for vacancy, repairs, and cap ex factored in to that calculation.  The 4-plex is worth about 200k, so in theory, I can create 200k of equity in 20 years with zero of my own money invested in the deal.  

Would you sacrifice not having cash flow in order to not have to put any of your own money down?  

He is an older conservative investor, so is using this loan as a kind of retirement plan where he gets paid monthly and gets 3.5%.  I know I can turn a lot better return on that money, so I'll gladly take it at 3.5% for as long as he wants to give it to me :).  

No downsides that I can see.  I love getting rent that way, and I just deposit it straight into my rental checking account.  It's like a 2-3 day delay for the money to actually hit the account, unless you want to pay a small fee for an instant transfer.  

I should add that the home I am refinancing is a 2 unit home.  We currently live in the downstairs, so it does not cash flow positive.  However, after we refinance and eventually move out, we expect to bring in $1200 per mo. in rent and cash flow positive approximately $150 per month.  

I use Cash App, works great!

Looking for some advice on a refi.  Here is the situation.  Currently in a 15 year contract for deed.  Original loan was 90k @ 3.5%, still owe 65k.  Approximately 10 years left on the loan and my monthly payment is $643.  Wanting to refinance with the bank, cash out my equity, and pay off my contract for deed.  If that is approved, I would get 30K cash out, and pay on 90k @ 3.8% over 30 years, mo. pymt of $420.  Closing costs on the refinance are $2500.  To top it off the person I am in contract for deed with has agreed to re-loan me the 65k @ 3.5% interest over 20 years.  I am in another contract for deed with him on another property, so we are going to add that 65k into that contract.  My new payment for that 65k loan will be $378.  To recap I get 

(1) 30k cash from the bank for cashing out the equity in the home 

(2) 65k cash from my private lender.  

I end up paying:

(1) $2500 in closing costs

(2) $420 a month to the bank 

(3) an additional $378 a month to my private lender for the 65k being reloaned to me.  

I originally was paying $643 a month, now I am paying $798 per month, but get 95K now to invest either in ETF's or more real estate.  It seems like a no-brainer decision to me to do this, but I'm looking for some more sets of eyes to tell me what I am missing.  Thanks for your input!