Advice on structuring a deal - SFH San Diego

[Ali Hashemi]

Hi all,

My brother in law is in the navy and just got orders that require the family to relocate. They’ll be leaving San Diego and selling their house.

I really want to buy their home and turn it into a rental but I don’t have the capital. What I’d like to do is structure a deal where they cut me a deal on it and maintain partial ownership. Or another possibility would be partnering with someone to assume the loan on the house and pay my brother in law the difference between an agreed market price and what they owe.

San Diego housing is so difficult to get a great house like this for a reasonable price without getting beat out by cash offers. It's a tremendous opportunity I hope I don't miss out on. I would love to find a way to make a deal that benefits all parties.

What’s a good way to structure a deal like this? All thoughts and recommendations appreciated.

Thank you

Ali

[Dan H.]

Have you run the numbers on this SFR in San Diego? The reason I ask is that San Diego SFR purchased at retail have negative cash flow. The investors who invest in San Diego SFR either are finding them below retail or anticipating rent or property appreciation (or most likely a combination of both). Historically San Diego does have a very long track record of both property and rent appreciation. In addition, the market dynamics make it seem like continued rent appreciation over the next few years is very likely. Long-term a San Diego SFR has a good chance to be a good investment but the smart RE investors are not purchasing them at retail and many of them are taking a loss in the short-term.

Your brother-in-law likely is not so dire to sell to be willing to take significantly below retail price.  He may be willing to reduce the price by RE agent costs that he would incur with a traditional sale but a bigger discount than that would basically be a gift.

Someone that does not have the capital to purchase a SFR in San Diego I would think is unlikely to have the capital to supplement negative cash flow from owning the SFR. In addition, you would be an OOS investor so you would need a PM which would incur costs that would be avoided if investing local.

I am a big fan of San Diego RE but I am a bigger fan of investing local.  Your profile indicates you are not a newbie (your unit count is very close to my unit number) so you may have the experience to invest OOS successfully but I question if you have the capital for this investment and if you have run the numbers to realize how much you will be initially supplementing this investment.

Good luck