And found Tenant Buyer who puts $20,000 down, pays a premium lease and does all maintenance and repairs Assumption: Goal Is Cash Flow with Eventual Property Appreciation Assumption: Goal Is Cash Flow, captured equity with Eventual Property Appreciation Assumption: Investment Amount $80,000 Assumption: Investment Amount $50,000 Location: Columbus Ohio Location: Phoenix Arizona 2,373 miles from Los Angeles 373 miles from Los Angeles Investor 100% Profits (No Back End Equity) Investor 100% Cash Flow & Back End Equity $$ Investor's Total 10 Year Return (Plus (Does Not include Tax Write Off's) $75,240 Investor's Total 10 Year Return (Does Not include Tax Write Off's) $249,971 Investor Funds LLC $80,000 Investor Funds LLC $50,000 Investor Profits $75,240 Investor Profits $249,971 Less Cap Ex (Roof, AC Unit, Landscaping, Water Heater, etc) -$$$ No Cap Ex (Tenant Buyer does All Maintenance and Repairs) $0 Investor sets up LLC Investor sets up LLC Investor Funds LLC $80k or applies to bank and hopes to qualify Investor Funds LLC $50k Turn Key locates & acquires property Turn Key locates & acquires property Turn Key teaches Investor Subject To, Wrap, Lease Options Investor 100% Ownership Investor 100% Ownership Investor 100% Cash Flow Investor 100% Cash Flow & Back End Equity Investor makes management decisions Investor makes management decisions Investor collects rents, disburses Investor collects rents, disburses Property ARV $80,000 Property ARV $225,000 Purchase Amount $80,000 Purchase Amount $180,000 Cash Out - to Seller $0,000 (Cash Out - to Seller) $15,000 Seller Carry Back $0,000 (Seller Carry Back) $20,000 Bank Financing $64,000 Amount Cash Have To Put Down $16000 (Underlying Note Subject To) $145,000 Monthly Payment Out $419 Monthly Payment Out $995 Repairs & Maintenance $5,000 No Repairs or Maintenance $0 Sell Amount to Tenant Buyer $0 Sell Amount - New Tenant Buyer $245,000 Seller Carry Back (Paid when Tenant Buyer Refinances) $0 Seller Carry Back (Paid when Tenant Buyer Refinances) $20,000 Underlying Note Subject To (Paid when Tenant Buyer Refinances) $0 Underlying Note Subject To (Paid when Tenant Buyer Refinances) $145,000 Cash In – From New Tenant Buyer $0 Cash In - From New Tenant Buyer $20,000 Monthly Payment In – From Renter $550 Monthly Payment In – From Tenant Buyer $1,650 Investor Does Repairs & Maintenance $$$ Tenant Buyer Does Repairs & Maintenance (No Cap Ex) $0 Amount Tenant Buyer Owes Investor $0 Amount Tenant Buyer Owes Investor ($245k - $20K) $225,000 Monthly Payment In $550 Monthly Payment In $1,650 Monthly Payment Out $419 Monthly Payment Out $995 Monthly Cash Flow Investor Total $135 Monthly Cash Flow Investor Total $655 Vacancy Rate 80% Vacancy Rate – None Renters Occasionally Need To Be Evicted -$1,000 Note: Tenant Buyer puts down $20,000 Non Refundable – If the Tenant Buyer vacates the property – another Tenant Buyer is found with an additional $20,000 Non refundable down $20,000 Year 01 Cash Flow Investor - $135 monthly $1,620 Year 01 Cash Flow Investor - $655 monthly $7,860 Year 02 Cash Flow Investor - $135 monthly $1,620 Year 02 Cash Flow Investor - $655 monthly $7,860 Year 03 Cash Flow Investor - $135 monthly $1,620 Year 03 Cash Flow Investor - $655 monthly $7,860 Year 04 Cash Flow Investor - $135 monthly $1,620 Year 04 Cash Flow Investor - $655 monthly $7,860 Year 05 Cash Flow Investor - $135 monthly $1,620 Year 05 Cash Flow Investor - $655 monthly $7,860 Year 06 Cash Flow Investor - $135 monthly $1,620 Year 06 Cash Flow Investor - $655 monthly $7,860 Year 07 Cash Flow Investor - $135 monthly $1,620 Year 07 Cash Flow Investor - $655 monthly $7,860 Year 08 Cash Flow Investor - $135 monthly $1,620 Year 08 Cash Flow Investor - $655 monthly $7,860 Year 09 Cash Flow Investor - $135 monthly $1,620 Year 09 Cash Flow Investor - $655 monthly $6,000 Year 10 Cash Flow Investor - $135 monthly $1,620 Year 10 Cash Flow Investor - $655 monthly $7,860 Cash Flow To Investor $16,200 Cash Flow To Investor $78,600 Repairs & Maintenance (Roof, AC Unit, Water Heater, Painting, Appliances, Landscaping, etc) -$$$ No Repairs or Maintenance (No CapEx) Tenant Buyer Does All Maintenance & Repairs $0 10 Year Principal Pay down by Renter $11,940 10 Year Principal Pay down by Tenant Buyer $28,871 Cash Down - From Tenant Buyer $0 Cash Down - From Tenant Buyer – Goes into Investor’s Pocket $20,000 Tax Write Offs For Investors $$$ Tax Write Offs For Investors $$$ Appreciation Is Investor's -10 Year $40,000 Appreciation Is Investor's -10 Year $112,500 Note: Appreciation on a $80,000 property in Indiana at 5% per year is $4,000 per year $4,000 Year Note: Appreciation on a $225,000 property in Arizona at 5% per year is $11,250 per year $11,250 Year Investor Borrows From Bank$80k to acquire property $80,000 Investor Funds LLC $50k (From Cash IRA 401(k) for Property $50,000 Sell Amount to Tenant Buyer $0 Sell Amount to Tenant Buyer $245,000 Payoff Amount for Investor $64,000 Payoff Amount for Investor $180,000 Creates “Back End Equity” $16,000 Creates “Back End Equity” $65,000 Original Down – From Tenant Buyer $0 Original Down – From Tenant Buyer $20,000 Tenant Buyer – Pay Off Amount $0 Tenant Buyer – Pay Off Amount $225,000 Tenant Buyer Eventually Refinances $0 Tenant Buyer Eventually Refinances $225,000 Underlying Note Paid Off $64,000 Underlying Note Paid Off $145,000 Seller Carry Back Paid Off $0 Seller Carry Back Paid Off $20,000 Remaining Equity $16,000 Remaining Equity $60,000 10 Year Cash Flow To Investor $39,300 10 Year Cash Flow To Investor $78,600 Backend Equity – Investor 100% $0 Backend Equity – Investor 100% $60,000 Total $39,300 Total $138,600 Investor’s Amount Invested Investor's Total Return From Tenant Buyer 10 Year Cash Flow Principal Pay Down Appreciation Back End Equity Total Minus Repairs, Maintenance, AC Units, Roof, Water Heater, Landscaping and other Cap Ex $80,000 $75,240 $0 $39,300 $11,940 $40,000 $16,000 $75,240 -$$$ Investor’s Amount Invested Investor's Total Return From Tenant Buyer 10 Year Cash Flow Principal Pay Down Appreciation Back End Equity Total Minus Repairs, Maintenance, AC Units, Roof, Water Heater, Landscaping and other Cap Ex $50,000 $299,971 $20,000 $78,600 $28,871 $112,500 $60,000 $299,971 $0 Additional Investor Funds to buy Another Property in Year 1 $0 Additional Investor Funds to buy Another Property in Year 1 $20,000 (From New TenantBuyer’s DownPayment) Investor's Net Return Profit $75,240 Investor's Net Return Profit $249,971 10 Year ROI 9.40% 10 Year ROI 49.90% 1st Year ROI Cash Flow 2.03% 1st Year ROI Cash Flow 15.72% 1st Year ROI Including Down Payment 2.03% 1st Year ROI Including Down Payment 55.72%

After 5 years, there is low risk for the next ten months.If this situation freaks you out, I assure you there is FAR WORSE ahead. 

If you demonstrate that you are willing to take risk with your own skin in the game (HELOC), they are more likely to loan money to you, and at a lower interest rate than someone who has no experience. 

If you file as a separate business entity (a partnership or an S-corp), the audit risk is less.179 is unlikely to create a red flag, in my opinion.

Alternatively, sell this place and roll the cash in to a true investment property.One thing to keep in mind is by moving out, you may be opening yourself to risks.

., high risk, high reward). 

Yes, they can still try to leave before the year is up but I have policies to reduce my risk and loss if that happens. 

I hate to see cash wasted, and at risk,  by sitting dying a slow death in real estate.

We definitely have a well written out LLC with a good operating agreement however because the mortgage note itself is in the name of one of the partners, I’m unclear as to whether he specifically is at risk if something were to go wrong at the property.

It allows you to diversify into a portfolio of homes as opposed to putting all of your proverbial eggs in one basket.Be cautious tho as over the years I have witnessed countless investors buying properties in crappy areas, for more than they are worth and being passed on to crappy property management that nickel and dimes them to death (I guess all of those 15% "awesome" paper cap rates and promises of financial freedom aren't that awesome after all...)This is not just true for real estate deals but life in general (Your "piece of paper" degree does't necessarily dictate success in your chosen profession or your business)Real life experience is different to what any "piece of paper" says.In all reality guys it takes time to build financial freedom, and the more you can diversify your risk across multiple properties in your portfolio the less risk you bear in the long run.I may not be the smartest Aussie you have ever met, however I do understand a few basic rules that I follow on every acquisition I make.Strength in numbers, cash only, patience, and discipline.Let's talk about Strength first.Price point plays a big part of "strength in numbers" as it is safer to acquire 5 homes for a total of $350,000 as opposed to one for $350,000.What happens if "that one" property goes untenanted for 5 months?