Investor · Alphen Aan Den Rijn, Zuid-Holland · Member since 2015 · 29 posts · 6 votes
I am looking for advice for a situation completely new for me. We have a lead that asks to leverage $90,000 as 10% equity down payment for long-term (10-30-Years with no balloons/calls shorter than 10-years). CFD holds by seller(s) and to generate to the Seller no less than 8% interest, given a producing CAP rate of +15%.
So the total deal is $900.000k
His question is clear, I think a lot of buyers want a deal like this.
Still I am curious because the first calculations look profitable (with the assumption that refinancing at 5% for 20 years is possible).
At this moment I have a part of the required portfolio, lets assume $200.000 value.
Is it possible to refinance the contract that we make with the buyer and profit from this? Or is it not smart and just use our assets to leverage our own portfolio?
Investor · Alphen Aan Den Rijn, Zuid-Holland · Member since 2015 · 29 posts · 6 votes
11y
Thank you Chris.
We are a company located in Detroit, owned by Americans and Europeans. The client is looking to purchase properties in Detroit.
We have a lead that asks to leverage $90,000 as 10% equity down payment for long-term (10-30-Years with no balloons/calls shorter than 10-years). CFD holds by seller(s) and to generate to the Seller no less than 8% interest, given a producing CAP rate of +15%.
If we want to do this deal I have to produce $900.000 worth of properties. That's about 28 properties, average worth $32.000. With this number we can make about 15% ROI or even a bit higher.
A part of our business is contracting, this way it's possible for us to have some profit per property. Lets say $5000.- profit per property. That's 28 * $5000 = $140.000
Another scenario could be that we rehab a distressed apartment building.
I would love to build this portfolio for my client in 6 - 12 months, and get the profit at the end of the 6/12 month period. I need to borrow money from a financer to build this portfolio. We can put down the $90.000 of my clients and we can put down $90.000 of our own money. With the help of the financer we start producing the properties.
I don't want to be responsible for the finance the next 20/30 years. Because what's the purpose of getting 8% interest and make $140.000 profit in 20/30 years if I can make a 15% or more ROI my self, and don't forget the appraisals we miss.
So I was thinking when the portfolio is finished and producing is it possible to get it refinanced in a way that my company receives the profit and the new finance is directly between my client and the financer?
I hope there is enough information to give an advise. Again I have no experience with finances, I always did my RE investing with cash.