All Forum Posts by: Ryan York

I  need help with numbers to decide if starting a syndicate would work for purchasing recovery homes or if I should just wait until I can purchase another one on my own

Property cost estimate 450k.

total cash to close 479k

80/20 split with 7% preferred returns...basically. 1% asset management fee, 2% due diligence and acquisition fee, disposition fee.. not sure

Rent annualized (38,400) minus taxes/ins (4,000) minus 7% (maintenance accrual for major repairs only) minus 1%(asset management fees for cash flow in the $31,496 range.

real estate prices in my are high, but I can charge a premium rent for sober living home which would increase returns.

Not sure if it would be worth it to syndicate or not.  any help would be appreciated. thank you!!!

@Tom Gimer  Thank Tom.   I would like to do commercial loans but the term are much more difficult at this point.  Shorter amortization and higher interest rates would really cut into my monthly cash flow...am i understanding that correctly?

thank you!

I have an interesting situation that I am looking for some advice on. 

I own sober living homes for men looking to recovery from substance abuse addictions.  We are ready to add more houses.

Problem: We may no longer be able to get traditional financing since we own so many homes already.  We could rent, but rental prices are so high it would cut into profits and it would be difficult to find an owner willing to lease to us since we would need to make alterations to the home to accommodate up to 12 men.

So I have been thinking about several solutions.  The one that I would like some advice on is this:

I would seek out an investor looking for a hassle free real estate investment.  The real estate investor would own the house but would have no landlord duties at all.  I would be responsible for all expenses including remodel, repairs, maintenance and would even pay the mortgage, taxes and insurance directly.  

Basically, the only responsibility of the owner would be to open his mortgage statement once a month and see that it is paid.  

In addition, I would pay the owner a 5% annual return on his original cash investments.  Up to 20% of the price of the home  So:

House price: 300,000

Investor down: 20% or 60,000

Annual return: 5% of $60,000 which would be $3000

the cash return is not amazing, but considering that the owner does not have to pay for repairs, maintenance, management, vacancies or upgrades....the profit would be comparable to any single home rental.  The cash return is NOT dependent on the income of the business. 

Owner Benefits

1. 5% annual return

2. Home appreciate (roughly 2-5%) on $300k is $6000 to $15,000

3. We pay down the mortgage (around $3,600-$5,000 annually)

with the various avenues of profit, the owner would realize a around a 20% return on his $60,000 annually.  The safety of the investment would be backed by the value of the house.

Some stipulations

We would likely require a 5 year commitment.  The owner can opt to sell or continue to own after 5 years.

The owner and my business would have to agree on the house.  It would have to be located in an location within 1 mile of treatment centers and would have to accommodate up to 12 men - shared bedrooms.

Of course, we would agreed to any remodels, and would agree to keeping the house clean, maintenance up to date, etc to protect the investment.  

I would love some input on this as I have never done a deal like this.  But I am trying to make a deal mutually beneficial.  

looks good on paper.  you put in zero for repair costs?  no capital expenditures?  so you are saying the home will rent as is then. i don't know your market, but with a price that low with the potential for that high of rent, i would invest in a really good home inspector.  know the age of the furnace, ac, and water heater. make sure the plumbing, roof, and foundation are good. if you do your homework and it checks out... i would say you have a solid deal. 

unless this place is hot and getting a lot of offers, i would ask the seller to pay some of the closing costs too.  

hope that helps

and you can diversify your risk by having more properties

i agree with Josh.  it depends on what you want from your investments. if you want to increase your monthly income, i would leverage with debt and acquire more properties.  your renters will be paying the interest on your debt   most of the time you can get the seller to pay for closing and real estate agent fees.   of course, you want to buy the properties correctly to make sure you're making money upfront on the deal by paying under market, and making sure your cash flow is good so you get that monthly income. 

 if you're looking to just get the appreciation value, and build your equity and you could buy one good single-family home and sell it later 

I am a small investor in the Boise area and own a couple multi families.  A lot of people look to Boise because prices are lower and it is a growing area. From my perspective ( I am no expert) prices have risen substantially over the past 7 years (as everywhere) and it is difficult to find properties that meet good cash flow criteria at the moment.