Off the Cuff Deal

[Steve Sanchez]

Interested in getting some input and opinions on a deal I just put together on the fly over a phone call.

A friend of a friend heard about deals I was putting together on D properties for Buy and Hold (I have 15 properties which I'm all in for between 15-25k and they rent from between $450 to $1,100 a month). He wanted in in some fashion...

I was initially thinking of paying him a percentage to borrow the funds to purchase and either flip or keep as a buy and hold. He was not interested in that but  was very interested in what I was doing.

So this is what I pitched to him: There is one particular property I've been looking at, not a fantastic deal for what I normally do, but solid given my evaluation. Property would be $8,500 a 2BR 1BA (which I'd turn in to a 3BR 1BA) with a one car garage. Has a newer roof, siding and carpet, will need a new furnace and duct work to replace a boiler/radiator system. Other than that minor stuff, paint, a little tile repair etc. Basically $12,000 to $15,000 completely rehabbed.

The deal I offered him (and he was thrilled with it) was He pay for the purchase and rehab, then we divide the rental income as follows 1/3 goes to pay back his investment with no interest, 1/3 goes to him and 1/3 to me. This is after expenses (taxes, insurance, maintenance etc) and after his principle is paid back we will be 50/50. And of course equal owners in the property. Rent should be $650 to $750 per month.

Thoughts?