Deal or No Deal in Irvine CA

[Matt Inouye]

Hello BP Community,

I had an odd deal come across my desk and I wanted to gain some insight as to how to value it.  Long/short, a homeowner needs some upfront cash and is willing to sell their property at 480,000 when it is easily worth north of 1,000,000.  Owner is willing to carry the note at 0% for 20 years with the stipulation that they are able to live rent free.

Owner wants 30K upfront, $2000/mo and live rent free for 20 years.

I ran this through the BP rental calculator and obviously the CoC ROI is horrible (-2700/mo PITIA). However, if you take $1M with a 2% return for 30 years it ends up with a value of 1.8M. With no down payment, this is a 25% annualized return for those 30 years.

Do you guys see alternate terms to the deal?  I've considered potentially using the immediate equity to buy an out of state multi that produced enough cashflow to pay the 2nd position debt plus offset our holding costs over the years.  I'd be interested in hearing other views/thoughts.

Appreciate the help as always

Aloha,

Matt