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.

[Jon K.]

@Jose Reyes Sounds like a home run. When you say the ARV is 250, is that as it is today or does it need work? If it needs work, what's the estimated cost of the remodel?

What are your long term goals? To offer an alternative, why not refinance in 5 years or sooner to pay him off vs selling to keep a cash flowing rental?