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Updated over 5 years ago,
[Calc Review] A Great Deal!?! How to Structure a Partnership
Hey BP!
We are ecstatic, but we need some advice. Like some of you, my husband and I heard one of Gene Guarino’s podcast on Residential Assisted Living Facilities and fell in love with the idea. Oh, let me back up, my husband is a Pastor and we both work at the church. But before we started the church, I was a licensed Real Estate Agent specializing in helping Real Estate Investors find great deals. Residential Assisted Living allows us to do both, what we love and feel called to do, Care for people, AND Real Estate Investing.
We took Gene’s Course, got pre-certified with the State and started looking at houses. I guess I still have the knack for finding great deals, because while we were just looking to see what the market is like for a house that would meet our business needs, we ran across a pre-foreclosure and very motivated seller. It’s an investor who bought a house to lease but doesn’t want to put any more money in it to make it attractive to a regular family, but it is PERFECT for a Residential Assisted Living home. I’m talking a Cap Rate of 42%, cash flowing, $55,000 a month once it’s full! Thanks BP Calculator! This luxury home can comfortably support 25 residence with an average rent of $5000 per month!
The Seller is willing to sell the house below market value AND has offered to do Seller financing with 20% down and a 5.5% interest rate. The LTV would be 59%. We need another $600,000 to start the business.
My question is, how can I structure a partnership deal with him to create a WIN-WIN for both of us? Are there any other financing options that I should consider? We don’t have a lot of money saved right now. Our plan was to start saving and open our first house next year until this offer presented itself.
Just to be clear, here are the numbers.
THANKS BP! We really appreciate any advice you could give!
| Purchase House at 59% LTV | ||||
| ARV | $ 1,685,778.00 | |||
| 25 Beds | Deposits | Rent | Monthly | Yearly |
| Monthly Income (25*$5000) | $ 5,208.00 | $ 125,000.00 | $ 130,208.00 | $ 1,562,496.00 |
| Operating Expenses w/o P&I | $ 70,670.80 | $ 848,049.60 | ||
| Cash Flow w/o P&I | $ 59,537.20 | $ 714,446.40 | ||
| NOI | $ 714,446.40 | |||
| ARV | $ 1,685,778.00 | |||
| CAP Rate | 42.38% | |||
| Monthly Expenses | $ 55,150.00 | |||
| Property Tax | $ 2,500.00 | |||
| P&I | $ 4,294.57 | |||
| Vacancy Rate | $ 13,020.80 | |||
| OperatingExpenses w/ P&I | $ 74,965.37 | |||
| Purchase Price | $ 1,000,000.00 | |||
| 25 x 5000= 125,000 per month | $ 125,000.00 | |||
| Deposit | $ 5,208.00 | |||
| Expenses per month | $ 74,965.37 | |||
| Net profit per month | $ 55,242.63 | |||
| 20% down | $ 200,000.00 | |||
| 3% Closing Cost | $ 30,000.00 | |||
| Start up + Renovation | $ 621,170.00 | |||
| Cash Needed | $ 851,170.00 |
*This link comes directly from our calculators, based on information input by the member who posted.