Investor · Cary, NC · Member since 2014 · 9 posts · 1 vote
I am doing more income stream deals and want to know if this is a good approach for a passive investor for a jv partnership deal. Any inputs would be appreciated. We are putting a tenant buyer in the house for $5000 down and $895 per month. purchase price $110,000
Investment $75,000
monthly cash flow for investor (roughly) $500 a month
1-2 years collect the monthly payments until the date of sale.
At which point they get their principal back plus (roughly 10,000-15,000)
It's a jv partnership deal...not a lending deal. I've done jv deals on flips, not on rentals or rent to owns. Advise (even brutal in need be) appreciated. Is it a good deal for the investor? Any adjustments before approaching?
Real Estate Consultant · USA · Member since 2014 · 1k+ posts · 751 votes
10y
Hi Marilyn,
Not sure I understand the deal. Can you fill in the blanks please. Here's what I think you said:
$75,000 Current Purchase Price
$110,000 Future Price to Tenant Buyer
$895 - Monthly payments
Assumptions on my part: investor is paying all cash - no mortgage involved
Investor is making $6,000 (12x$500) per year or about 8% return on the $75,000. Is this $500 pure profit or do you have to pay back credits with that?
Plus, the investor makes another $10,000 to $15,000 on the sale which is another 13% to 20% but spread over 1 or 2 years. So if it's a 2 year deal and you pay the investor $15,000, the total return is as follows ($6,000 + $6,000 + $15,000 = $27,000 / $75,000 = 18% per year. It seems like a good deal for the investor, but they are taking all the risk.
But my real question is, what are you making. I'm assuming the balance of the monthly payments will cover other expenses and option credits for the tenant buyer? So you would make $110,000 - $75,000 - $15,000 = $20,000 minus any credits that you may have to cover represent. You would get paid $5,000 upfront and the balance at the end of the deal.