Approaching an investor -- advice from a pro welcome!
Folks are encouraging me to seek private investors to help me with a deal. This would be the first time I have approached anyone that isn't a big bank, so I'm unsure if what I am offering is enough to whet the appetite of someone with Bigger Pockets than me. I'd appreciate some pointers from anybody that has worked a deal with a private investor to tell me what they'd do/offer differently. So, what I've put together below are some of the numbers I'm thinking. I used 15% (simple) because it represents a "middle of the road" return compared to the volatile S&P 500 index over the last 5 years.
Would this tickle your investor's interest? If not, why not?
| Purchase price | $1,700,000.00 |
| Annual income | $312,900.00 |
| Annual expense | $(89,308.00) |
| Annual set-aside | $(12,000.00) |
| NOI | $211,592.00 |
| Less debt service | $(70,887.00) |
| Annual cash flow | $140,705.00 |
| Investor Terms | |
| Principal amount | $363,989.00 |
| Interest rate | 15.00% |
| Term | 60/mos |
| Yield | $418,587.35 |
| Gain | $54,598.35 |
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- Real Estate Broker
- Cody, WY
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What about vacancies? Property management?
As a rule of thumb, insurance is usually around 1% of purchase price. That's almost 4x what you show.
$12,000 for maintenance? 5% of purchase price would be conservative, which is $85,000 per year and 7x what you show.
Something doesn't smell right.
- Nathan Gesner
