Equity or Cashflow - Owner Finance Deal

[Jason James]

Good day all...

I have a package deal of 5 SFR that I can purchase via owner financing with 0 down, 6% on 30 year amortization and 5 year balloon. Cash flow will be about $1,363.00 per month after all expenses. The properties are in average (no major repairs needed) condition but the area is a little rough. All properties are rented and current. The seller is motivated and no longer wants to be a landlord.

I have never deviated from my 30% ARV equity rule on purchase. My purchase price on this deal at this point puts me closer to the 20% ARV equity mark. These properties will get very little appreciation since the area is just not that great. Not to mention I never buy based on appreciation either, it's just a bonus to me.

My question is this... Would you buy these properties with good cash flow if they didn't hit your equity target? Meaning you are paying closer to the actual appraised value of the property.

My thoughts are a couple big repairs, issues or eviction and I can dip even deeper into the loss of equity.

Couple positive notes. I have known this seller for a long time and I trust his disclosure on condition of these properties and 0 down with instant cash flow isn't bad either.

Thoughts?