Potential Rental Property Deal? Thoughts?

[Jose Reyes]

Hello everyone,

I got in contact with a homeowner that is retiring soon and wants to sell their current house (2130 sqft 4 bed 2.5 bath.) They will be moving toward the end of this year (2021) so they are very motivated to sell. The ARV of the house is around $250k and he is selling it to me for $190k. The seller will owner finance the house.

This is how I structured the deal…

- I will be giving a $10k down payment

- He will loan me $180k (with no interest)

-30 year amortization ($500 monthly payments) 

- 5 year balloon 

I plan on leasing the property for the next 4 years (that market rents for $1800) 

- since the monthly payments are $500, it will cash flow around $800 after all expenses 
- in the course of 4 years I will cash flow $38,400. 

On the 5th year, I plan to sell the property at ARV to pay off the the remaining principal

-since the tenants are paying the principal down slowly the loan of $180k will lower to $155k in 4 years 

-so if I can sell it for $250k, I will be making around $90k 

In the course of 5 years I can make around $130k. 

I am still new to creative financing so if I am missing something or doing something wrong please let me know. I am very interested into improving my skills.