Question on whether a deal is worth it

[Yoav Schatzberg]

I have the opportunity to by a 2br 2ba condo in San Diego, in a neighborhood with the best public schools, from a family member.  We'd be buying at market rate, but this means we could get Seller Carryback financing at 0%.  That said, it comes with a few catches:

1. We would need to rent back to the family member, who is on a fixed income.  This means cash flow isn't possible pretty much for the life of the loan but we can theoretically sustain that if it's a good investment, and we'll have a solid tenant who takes care of the space.

2. There are some special assessments coming up, and I've heard that some of the neighbors have been dropped by their home insurance providers and are struggling to find affordable home insurance in SD.  So I wonder if we're in for drastically increased insurance expenses ahead.

i havent used the BP calculator but the Return on Total Equity will be north of 10% for the first 7 years.  I'm not sure whether this is a deal that's worth it, or even how to think about the benefit of a property that will not cash flow for 15-20 years.  

What do you think?  How should I think about this? I can afford to have it be an investment for my kids and not cash flow for me, but I could also deploy that money elsewhere.

[Yoav Schatzberg]

Thanks Gents,

I'm sure I could find a better deal somewhere else, but I'd like to invest in markets that I know which are all in CA and mostly in expensive parts of CA (San Francisco, San Diego for example).  So finding a first deal that is cashflow positive and all the rest seems like a challenge.  I agree with your assessment though.