3/1 SFH rental numbers

[Adrien C.]

I have a purchase agrement on a 3/1 in a B+ neighborhood. I can flip it to an investor and make a quick buck or I can fund through a private investor and hold it as a rental. If I do this, I will start marketing it as a rent to own.

The investor would pay $50K and wants 10%. The house is worth $85K. There is no other note on the property. If I rent it out, I'll throw in $2k of basic updates as it has new carpet and hvac/h2o systems. If I do rent to own, I'll market it for $70K and they can earn the equity by finishing the updates them self. Rents are $1000. So after calculating in maintenance, vacancy, CapEx, management, etc, there is very little cashflow for me (like $50/month). If I paid for it myself, I wouldn't do it for this low cashflow. However, because of the equity, I think it might be worth it. I don't have time on this property to get a bank loan as she needs the cash ASAP. My thoughts are to refinance in a year at a lower rate.

Would you do this for little cashflow (yet banking $280/month for the anticipated expenses) because of the equity?

Also, when you are getting private money, what is a typical interest rate you offer? I'm looking to expand my private money lenders with friends/family/past business clients and want to make it worth it for them and myself at the same time.

Thanks

[Chris Seveney]

Is regular financing not an option. 10% for but and hold is an expensive interest rate. At that rate it doesn't make sense to buy and hold as you note cash flow is too low. If you got a normal interest rate the numbers would look a lot better