Owner-Occupied 3-Partner Investment Scenario - Any Thoughts?

[Nina Grayson]

I have two investor partners  who want to do a deal that includes one partner owner-occupying a unit.  Do you think this structure is a good deal?

Location:  Los Angeles County

Partner 1 (P1)

- P1 wants to owner-occupy with family of four (spouse and two children)

- Prequaled self (not including spouse) for $435k.  Lender ran numbers assuming a duplex, with 2nd unit as income.   

- Down $80k

- $435k would only get P1 properties in South LA, which does not meet P1 standard of living, so P1 decided to get one or two more partners to increase buying power for a better location.  

Partner 2 (P2)

- P2 is an Agent and will use commission as carry 

- Maximum purchase price $1.2 mil.

- Comm. is approx. $20k. 

Partner 3 (P3)

- P3 will take out up to $200k from equity in SFR for down

Partners will form an LLC for the purchase

-6 plex, Two 2Br, Four 1Br

- Total Down = $300k (25%)

- Loan Amt. = $900k

-Terms = 30 year, 4.5%

- Monthly payment = $5600

- Monthly Expenses = $1000

- Rents = $9600

[Manolo D.]

Nina Grayson Well, that’s the normal sharing, what if market dips, so the 1,000k (for simple computation, instead of 1,200k) one owns 10% and others 50% and another 40%. Now the property at year 1 is at 900k and 50% wants out, it will be a breach of contract but he doesn’t care, he wants out, he thinks at year 3, the property will be worth 750k. What will you do? I’ve tried structuring even just 2 parties, and i couldn’t even cover all the what ifs, i was on page 15 with a single space font 10 contract and i think I covered 30-40% on what I should cover. make 3k of 300k is already a bit scary itself. Good luck though.