Model help for "unique" situation

[Jeff Wilkerson]

Hi BP! First post and looking forward to more. Anyway, my Uncle is retiring and basically offered me a chance to partner up with him in an effort to make some money/create equity to buy a personal home in the Bay Area. The catch is that I would have to do the legwork. Once you understand the deal, you'll get it. Deal as it stands right this second: - My uncle will front most of the down payment on the investment property. - I have to contribute 5-15% of the DP - per his "demands," I need to create a model that shows a refi in X years where his money can be pulled out and my wife and I assume the investment in its entirety. The model also has to show our new CF, CoC, etc. after the refi. Where do I even start? Thanks!

[Nick James]

Hey @Jeff Wilkerson,

Welcome to BP and that is pretty awesome of your uncle to do! Based on your post, it sounds like you are looking for a value add property. Something you can buy cheaper than market, rehab it, and refinance. It's called the BRRRR strategy. I am kind of in the same boat as you in terms of trying to best figure to do this in the Bay Area but here is what I know so far. First off appreciation is never guaranteed, even here in the Bay. We are in a hot market now but things could turn and the more years you wait to refinance, the higher chance this hot market could start to cool off. So you will want to try and pull your money out as soon as possible. That being said, I suggest you figure out which areas of the bay you want to invest in.

Look for areas that are seeing some growth. I like to see what new businesses are coming to the neighborhood, population increase, rent increases over time. If you want to get data on a particular city, you can use https://fred.stlouisfed.org/, http://www.city-data.com/, or reach out to investors here on BP.

There are some great articles here on BP for understanding the basics of deal analysis like https://www.biggerpockets.com/renewsblog/2010/06/3.... You mentioned you need to show your uncle a model, BP has some great calculators for that like https://www.biggerpockets.com/buy-and-hold-calcula.... Go play with it and you will see it gives you a break down of COC and debt pay down. I'm sure others will have more to say. Good luck and hope that helps!