Carrying financing for a first deal. Should I do it?

[Nicholas Doyon]

I have been looking into REI for years and recently have started looking for opportunities to pull trigger on my first deal. I have been networking about it and it finally paid off. My roommate from college messaged me tonight about getting in on a deal with him and his business partner who own around 40 properties together.

Here’s the deal:

-Side by side semi dettached on same land sold together

-Anticipated closing price: 270k each side (540k for both)

-budget for repairs 15k

-Property in an up and coming area

-estimated appraisal after renovations 350k/side

-anticipated cashflow: 12,500 annually

-A hard money lender is putting the downpayment (20%) + 15k for repairs for 50% equity

-my roomate and his partner would take 30% and take care of property management and renovation work through their contractors

-they need someone to finance the remaining of the loan (432k). This is where I would come in and put the mortgage under my name for 20% equity. No money needed on my part.

-mortgage payment expected to be around 2k/mth. We’ll be getting 4,7k in rent/mth. My college roommate and his partner would send me the amount of the mortgage every month for me to pay it. At the end of the year, we split profits based on equity.

-If our conservative calculations are right, at 20% equity, just by carrying the mortgage, I’d be cashflowing about 2.5k/yr on top of building equity on a property that is expected to appraise 80k after renovations + 3% market appreciation.

I see this as a great opportunity to get my feet wet in REI, start building a network and learn a lot from more experienced investors while making some money.

What do you guys think? Is this a good idea for a first REI deal?