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DEAL OF THE WEEK: Why Put 20% Down On A Rental Property When The ROI Is Better With ZERO Down?

Updated: Aug 1, 2023


Nowadays when we ask passive real estate investors what a good deal looks like to them, we usually hear something like...


"It would be great if I could get a 20% down payment instead of 25% with a -cash-on-cash return on investment (ROI) of 10% or more."


To be perfectly honest, under normal circumstances, that would indeed be a pretty good deal!


BUT WHAT IF...?

What if you were a member of a national real estate mastermind community with members committed to collaborating to reduce risk and create long-term wealth - TOGETHER?


This community is sponsored by real estate entrepreneurs (called Deal Architects) skilled at structuring real estate deals with optimal risk and maximum profit potential for all stakeholders. And it just so happens that landlords in this community have opportunities to buy rental properties with 0% to 5% down payments.


DEAL Of THE WEEK:


Property: Memphis Tennessee


Objective: Initiate ZERO Income Tax Strategy via buy & hold properties for Mortgage-Ready Landlords (MRL).

Downside Protection:

  1. Risk spread among 2 or more partners

  2. Property is presold to a highly qualified Mortgage-Ready Landlord (Reverse Wholesale)

Deal Flow:


The property is under contract with the Mortgage-Ready Landlord/Deal Architect with the goal of acquiring property (1/2 duplex) to hold in the portfolio.


After Repair Value (ARV): $110,000 Purchase Price (subject to): $45,000

Repair Estimate: $30,000 Holding/Closing Costs: $7,500

Lease Price: $1,200/month


Total Investment Required from MRL: $32,500


Phase I - Mortgage-Ready Landlord will purchase property

Phase II - Repairs are completed and the property is leased

Phase III - MRL will refinance to recapture the initial capital outlay of $32,500


Estimated Project Completion: 90 Days Estimated Net Monthly Cash Flow: $200 Estimated Total Net Equity: $27,500


POTENTIAL PROFIT DISTRIBUTION:


Mortgage-Ready Landlord:


  • Return of Principal + Monthly Cash Flow of $100 with NO Money at Risk

  • $13,750 of Instant Equity

  • 100% Tax Benefits

  • 50% of Risk/Equity Moving Forward


Important Note:


This particular deal is far superior to the 20% down scenario in 2 very distinct ways:

  1. The return on investment (ROI) is much greater than the 10% mentioned previously. In fact, in this case, the ROI is INFINITE because you can't calculate a return when the net investment is ZERO!

  2. This property is being purchased below market value so there is also instant equity going in!

This is just one of the many possibilities available within a collaborative environment of people working together and leveraging each other strategically!

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