Investment Info:
Single-family residence buy & hold investment.
Purchase price: $135,000
Appraised value at time of purchase was $190,000. Purchased for $135,000 using private money at 100% LTV and 7.5% interest. Interest-only payments for 18 months with a balloon due on month 18. Approximately $325 cash flow renting well below market to the previous owner.
What made you interested in investing in this type of deal?
The immediate equity, the sweet private money terms, and the cash flow. Win-win-win. It was a huge win for the seller too because he had gotten himself into financial troubles and this deal got him out of it. Great for all parties involved.
How did you find this deal and how did you negotiate it?
The seller reached out to me saying that he was thinking of selling it, but didn't want to go through the hassle of listings/showings etc. I told him that I would make a cash offer, but that it would be much lower than the value. It worked for him and we made it happen.
How did you finance this deal?
I borrowed the entire purchase amount from a colleague that was willing to front the entire amount and only charge 7.5% interest.
How did you add value to the deal?
The seller is a recovering alcoholic that had made some horrible financial decisions. The value I added was giving him a lifeline and pulling him out of the financial hole he had dug. We were also able to close quickly and hassle-free and then rent back to him in a way that made his living expenses lower than before this deal.
What was the outcome?
It is currently rented with $325 monthly cash flow and I have $55,000+ in equity from the deal.
Lessons learned? Challenges?
Make it about solving problems and the money will work out if it is supposed to happen. Always look for a win-win. Nobody wins when one side takes advantage of the other. If it doesn't make sense financially and doesn't benefit all parties, it probably shouldn't happen.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
I am the agent in this deal.
