Reviewing Mixed-Use Long-Term Rental Deal

[Sheldon Alex]

Good day everyone! I’m back at it again! Some previous deals I shared came out to be complete duds! But this time, I thought I’d share a deal that, if everything executes to near perfection, would signal a victoriously blissful conclusion for the borrower and lender.

With this deal, I collaborated with three investors in the underwriting. In which case, they did a phenomenal job!

The borrower bought a deal that contained two properties on one lot. One was a SFR (4 bed / 2 bath) and the other was a duplex.

What was the purchase price?? $350,000. Thus a $341,777 loan was on the property.

The borrower rented one side of the duplex for $1,550. He acquired a tenant for the SFR at $2,550 a month, bringing his cash flow to $850 a month. The other side of the duplex he planned on renovating himself, with the goal of turning it into a STR.

Now, he was asking for $100,000.00 at a 20% flat rate for three months. A portion of it to reserve for refinancing and most of it to pay off credit cards and prior debt.

You maybe thinking, $100,000 to pay off debt? I thought the same thing when I initially looked at this deal. But then two of the investors I worked with analyzing this deal discovered an engrossing revelation…

Included in the documentation letter contained an appraisal report assessing the property at $610,000.00!! Not only that, the borrower got a pre-approved term sheet for $750,000 from a lender to refinance the property!!!

With that, the investor is challenging the first appraisal to see if there’s anymore value underneath the hood, which would signal a jubilant moment for him if more value is discovered.

But overall, purchasing at $350,000 was a complete steal!! With tremendous equity, positive cash flow, security against the property, and a pre-signed quit claim deed, a PML answering the call to action on this one could receive good short-term gains!

Overall would love to read everyone’s feedback. But on this one, I give credit to my collaborators identifying this one being a slam dunk!! I’m just a messenger on this one.