Even if you find a sponsor with great character, the project can still be a bad one if the strategy is poor, or the pro forma is too aggressive.

The Pro Forma Cap Rate is the rate based on the stabilized property’s NOI.

She can also look on craigslist for similar folks who may be looking for a roommate and they could form a co housing situation. 

You have to dig into the pro-forma and ask the lead sponsor questions to get a feel for their business plan.

Of course, with all things, the answers to all these matters will depend on the circumstances.California tends to have more laws on the books and requirements and restrictions that it can be a good idea to form a CA LLC for out of state property so that you as a CA resident are covered, and to try to have your contracts fall under the purview of CA courts.

ThanksPurchase Price: $40,000.00Purchase Closing Costs $2,500.00 Estimated Repairs $30,000.00 Total Project Cost $72,500.00 After Repair Value $80,000.00Refinance Loan Amount $60,000.00 Loan Fees Amortized Over 30 years Loan Interest Rate 5.250% Monthly P&I $331.32 Total Cash Invested $12,500.00 $800.00 Monthly Income $582.66 Monthly Expenses $217.34 Monthly Cashflow 8.23% Pro Forma Cap Rate $6,584.00 NOI 2 months Time to Refinance 20.87% Cash on Cash ROI 16.46% Purchase Cap Rate

Purchase price: $280,000Down payment 20% ($70,000)Once inputted into the calculator this is what it spits out:Monthly income:   $2,375.00Monthly expense: $1,989.10Cash Flow:             $385.90Pro Forma & Purchase Cap Rate:               $5.95%NOI:                        $16,661.70Cash On Cash ROI: 6.34%Seeing if by the looks of this, this is a good one or are we missing something? 

To me this thing barley even cash flows (with financing of course) after the 2 year scenario of the pro-forma based on a purchase price on actuals at a 8.5% cap.

Depending on the answers to these questions is how you would form a strategy with the owner.I know that a lot of indoor grow equipment can be expensive, but yes, you have to consider depreciation if you are going to put a value on his equipment.

If you go this route you may want to consider increasing your liability or getting an umbrella policy.Once you form a company (LLC, Corp, Partnership) generally you have to get a commercial policy.Different carriers have different rates/rules.