Great deal but tricky financing

First off im well and truly into my Duplex, owner occupied, the tenant I selected is a God send.
Teaches me the ropes on rehabbing , fixing up stuff, even for free, he does this for a living.
For reasons he told me in honesty has bad credit because of a bad situation many years ago.

Anyways now he has got me in on this deal.
4 plex - purchase price around 80k, rehab of around 30k, will sell to me for 150k (max).

Rents in the area are 750$/month.
Total rent = 750x4x12 = 36 000$
50% rule cash flow = 660
Pro forma cash flow = [36000 - (5000+3000+4400 (Misc +Tax +Ins))] - 840 (Debt Service on 150k@6%) = 1127$

ARV = 300K.
As you can see numbers are great but heres the catch.

The money’s private, they are allowing me to get the property at 5% down.
Im worried that they might be a bunch of Shylocks , and in a way im just a Property Manager who’s taken all the risk and at their mercy.
What if they change the terms suddenly?
What if they alter the duration or other modalities of the loan?
Banks are straightforward but in this climate i’d rather not deal with them especially since its that much harder since its rehab property and hard money loans are a nightmare.
Can private financing be a life breaker?

Your proposed rent per month is $3,000.
50% rule would yield $1500/mo for operating expenses and $1500/mo for debt service and cash flow.
Debt service on $150K at 6% for 30 yrs is $899.33 so proposed cash flow of $600/mo

If you sign a legal promissory note for the private money, you and the lender are entering into a legally binding contract. They can’t alter something you both sign and are bound to.

As for rehab expenses, we were able to do a ton of work in our apartments for approx. $2500 per apartment. That included new shower surrounds/medicine cabinets/lights/sinks in the bathrooms, new countertops & sinks in the kitchens, new microwaves, new ceiling fans in living area & bedrooms, new paint throughout, flooring in some units, new kitchen cabinets in others.

Its called a ‘good deal’, and I have the comps for the area , rents are 750 without doubt.
The 150k price is rehab to rent , maybe youve heard of it.

He doesnt jump on it because hes a rehabber, he doesnt like to hold the note, plus the added advantage here is, the money is private the relationship is trustworthy, its a sure shot profit making deal for him.
Imagine - he goes in at 100k -120k and makes a guaranteeed profit of 50-30k as he already has a buyer(me).

Ive noticed you are very negative to almost every poster who asks for positive advice, in the other thread you suggested that the person foreclose on the property rather than give him advice on rewriting the loan.
Lucky for us, for every 1 of you there are 5 guys like Property Manager and co/.

Thanks Justin - Yes I had included a 10k down payment thats why my numbers were off slightly.
On average 5k per unit is what i imagine, except if the A/C or HVAC need replacing then the cost really hits the roof.

Banks are more straightforward in dealing but in these times not advisable I guess, never worked with private money.
But the good thing is right now there are some really amazing deals in the offing.

If you have HVAC issues, remember window a/c units and baseboard heaters are going to be cost effective ways for you to go. We had to replace a couple window a/c units at around $200 each for a good unit that cooled 500 sqft. You can get 8 ft long baseboard heaters for about $60 each.
We haven’t dealt w/ private money yet either. We’re getting a loan for 15% down for investment properties this week.

If you take a mortgage you’re in debt too.

What according to you is a good deal, better yet, tell me about a property you own.

It took me a while to translate what you said… But 2,500 can do a lot. I rehabed a 60k 6 unit apartment building with about $2500 and sold it for $95k. (granted, i got a great deal on the place)

I didnt see if Mac said where he was from, but in many parts of the country, house prices arent anywhere near what they are in Cali. I bought 3 houses before the combined purchase price was 150K… and the NOI on the 3 together is 1550. It is possible.

I have to agree with justin on the price of the rehabs he mentioned. You can go to Home Depot and buy:
Bathtub - $325
Shower Surround ( 3 piece) $180
Sink, Vanity & Faucet - $350
Medicine cabinet/Mirror - $100
Sheetrock, compound etc… $50
Vinyl floor - $50
Shower Valve/ head. $120
Misc. Plumbing items ($100)
Toilet - $150
10% contingency - $140
Total - $1565.

Stock basic cabinets - $750
Sink & Faucet - $300
Formica Countertop - $150
Vynyl flooring- $150 (144 sq. feet)
Stove- $350 new
Fridge- $350. new
Total- $2050

Other rooms (3 rooms):
Sheetrock & supplies- $200
Carpet remnants- $300. (3- 10x12 rugs).
Paint & supplies - $200

Grand total for everything $4315. You can ad another 15% for unexpected cost and that will put at $4962 for a 3 bed/ 1bath apt. You can save a lot of money by buying used appliances and painting cabinets that are in good shape. The nice thing about apts. is that you don’t have to use high end products and you don’t have to replace with new items. Go to Home Depot and verify these costs. I’ve purchased all this for my own home. That’s where I got the figures. It may vry in different parts of the country, but the rents are (or should be) higher to make it worth the rehab… I hope this helps.

I didn’t figure in the labor because I did the work MYSELF :shocked. My rehab #'s were based on Justin’s items. You said that it would cost $7k to “paint inside & out and that’s it”. Who’s doing the painting?? MichaelAngelo?? I doubt the Home Depot prices are that much higher in S. Cali. You made a lot of assumptions about Macjoubert’s figures when you didn’t even have the facts of what needs to be done. His main issue was with the actual financing of the deal. Lets not forget that not every property will require the same amount of rehab. But it really doesn’t matter because you have to buy the property at a price that cashflows AFTER… let me repeat… AFTER all the purchase and rehab costs. So it doesn’t matter if the property needs $500 or $50,000 worth of rehab. The cost has to be factored into your offer price. It makes no sense to pay more for a property than the income will support.