It's an older home rebuilt as 3 units. HVAC and appliances 6 years old; roof is older and needs replacement; no other known repairs. 2 long-term tenants plan to stay indefinitely, #3 just moved in on a new 1-yr lease. Owner has 20+ properties, is old and in ill health, and is cashing out everything to retire. Price is firm; she believes it's below market and she's not in a rush to sell.
List price: $99K
Total rent: $1750
Taxes ~$100/mo
Insurance ~$150/mo
Buyer: my LLC (I am 1 of 3 members); commercial financing 80% at 5.875% (payment ~$550).
Financials: 2 props clearing ~$1k/mo; partners adding $1k/mo total in new money; Cash on hand $11K; $15K line of credit at 11% is unused. My stake in this LLC is about $18K, or 7% of my Stash, but has grown fast over its first 18 months despite some mistakes... I tend to be less risk-averse inside the LLC, but I don't want to be reckless, especially since others are involved. Love to hear your feedback.
Property is 100 miles from our base and we have a nearby friend willing to manage; I think for 10% we can get basic management *and* some highly competent routine maintenance, plus a reliable referral network via his construction experience.
COA 1: use mix of cash and LOC for down payment, using post-buy profits to pay off LOC and fix roof in 6-9 mos total.
COA 2: use buy/renovate financing package, replacing roof and upgrading fixtures, possibly reducing cash outlay, as the final LTV is based on post-reno value and debt service is unlikely to be a limiting factor.
$1750 on $99K is 1.77%; hard to find here, especially in a reasonably safe neighborhood with stable tenants. Between some maintenance being included in the management, and long-term tenants, our costs could easily be 40% or less and not 50%, but I think the return is high enough regardless. Any thoughts?