One All Cash Deal VS Many Leveraged Deals running concurrently?

[John Jack R.]

I know that to many of you the answer is obvious but is it?

I run into many investors who seem to be stuck on the one deal at a time paradigm.

More importantly, they seem to be stuck with using as much of their own cash and credit as possible.

Now of course, the guys who make money selling seminars, are pushing people to use as much of their own credit as possible. Leverage credit cards, bank loans, HELOC's and the list goes on and on. Now that's totally awesome assuming you have the cash flow to service the debt and that your profits are not eaten up by high interest rates, AND we all know that everything cost more and takes longer than what we originally anticipated. Is it also really wise to put all of your eggs in one basket?

This is why I subscribe to the power of many. After all we all know that there is strength in numbers. Now I know that none of us, when we're putting a deal together, purposefully buy the wrong property, or the wrong Rehab, and look to being stuck in a house on the market for more than we originally anticipated. But it does happen, and when we do sell its at a very skinny margin or no margin at all!

We don't do this on purpose but it does I happen.

This is why I am a big proponent of putting together as many deals as possible with other team players if need be.

Now I'm not going to bore everyone with intricate detail numbers on the purchase of the rehab but I will speak of my own experience with one of my projects here in Las Vegas.

I will address the numbers in broad brushstrokes hopefully everyone will get the point.

OK so let's use a real-life scenario

1. I bought a bank REO for $194,000
2. The house needed about $35,000 worth of work
3. The projected ARV was 290,000
4. The cash required to make this deal happen is 20% down for the purchase which would be $41,600 and $46,000 for rehab, insurance, utilities and VIG, which would puts the total at $87,600.
5. The total project value is $255,000
6. As a percentage of the total project value $87,600 represents 34% of the entire project.
7. So my question to you is would you for $87,600 giveaway 34% of the net upside?
8. You personally have Zero money in the deal.
9. Essentially if you could borrow the down payment and the rehab money from a third-party or JV partner and secure the 80% of the purchase price with a note & first deed of trust how many deals could you really do? And does it make financial sense at the end of the day?
10. Let's run the numbers
11. This is a real life example the property sold for $300,000, $10,000 more than the projected ARV.
12. Now you could use your own cash and make $28,064 or you could bring in a JV Partner with cash, they make $18,000 an 11% return on investment over a period of who knows. On a sale their money takes second priority after 1st DOT, and whatever is left is split between the parties

My question is, is this the best way to go? I am open to any and all suggestions that you might have.