[Calc Review] Help me analyze this deal

[Michael Loperena]

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Hey guys I’m looking at this deal and I have a few questions..

1.) Are there any creative ways to fund this deal if I have no money to put into it while also keeping a portion of the pie? I don’t care about owning the whole property but how could I introduce partnerships onto this deal?

2.) Is it even worth it putting 20% down plus rehab costs for just 1k a month cash flow? I’m not sure if the BRRRR strategy is good for this deal…

I’m still a newbie at this and any feedback would be amazing. I can provide boots on the ground help for anyone  needing it in exchange for feedback. I’m located in San Jose CA. If there is anyway I can help you please let me know. Thank you for your time.

[Mason Liu]

Hey Michael.

You definitely can introduce partners into the deal. However, I'm not sure if this is good enough a deal to introduce partners into. I say this because unless you are able to get a private money lender or partner to come in and lend the downpayment and renovation costs to you at a cheap rate, you aren't really going to be making much cash flow from the property itself. For example, if you have someone lend you $210k (closing cost + rehab cost + 20%) at 8% over a 30 year amortization, that is a monthly payment of $1541. That wipes out the entirety of the cash flow.

On another note, if the BRRRR is the intended strategy, it may be even tougher to use a third party because you won't be able to get enough cash out from the refi to pay off the third party. In this instance, you're still leaving in more than $150k in the deal (which that in itself is fine), but you have to be okay leaving that liquidity in the deal. If your cost of capital to put the downpayment/closing costs/renovation is too high, it might not be a deal.

Depending on the source of the deal (on market, off market) and the potential level of distress (IE: If on market, how many days on market. If off market, why are they selling), you can negotiate to make this deal more attractive. Can you get the seller to pay all closing costs and buy down the rate? Can they come down on price?

Lastly, your closing costs on the purchase side seem pretty high. Typically purchasing closing costs are roughly 1-3% of purchase price, whereas in this case $40k is over 6%.

Hope this helps!