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I own several properties that have either long term renters, or are vacation rentals. They break even or in the case of one vacation property, it generates a nice profit after expenses.
This weekend I came across a property in the area (of the profit generating vacation rental) which is in an upscale resort community. The equilevent updated turn key places are valued at $1 milion dollars, but I think this one will go at $800k to a cash buyer.
Trouble is, I dont have that type of money in cash, only half. So for me to make a real offer, I'd need another investor with $400k, or two investors at $200k each.
I know when people have good ideas to make a widget, they find angel investors (or some type of similar term) to lend them the capitol if they believe in the products potential. That of course involves risk for the investors. My plan involves collateralized property that can be bought $200k under the market value, so it is safe provided the housing market doesn't crash (as it did in 2008).
I assume on a big scale, there are plenty of wealthy investors with cash who find and sell real estate as a business, or way to profit outside their own fields.
I need to find a place where the potential investors are not so big/wealthy my proposal will be too small a deal to interest them. But they obviously have to possess the ability to come up with $200 to $400k which is not chump change.
Where do I look for such investors?
Just get a mortgage on the second half. It will certainly be lower interest than any "investor" will expect in return from this 'investment'. Especially considering other 'investment' properties are breaking even.
For $1 million dollar properties, your $200k profit could go poof overnight. There are no guarantees in real estate. Good luck finding a sucker, um.... investor.
Gee, no thanks. But thank you for offering me the chance to invest in an expensive place that might break even or it might not and if it does make a profit, I could have half the profit. It would have to be a heck of a generous profit for me to receive half and that would be enough to cover the investment of $400,000.
You might be able to borrow private money, but it will cost considerably more than getting a mortgage from the bank. If you've got half down, you shouldn't have any problem getting a bank issued mortgage at a decent rate especially if you have proof that this house will turn a profit every month.
I have enough experience with this resort area and property values to where I did not embellish anything. This place might very well fetch $1.2 million in a few years provided the economy/housing market doesn't hit a snag.
It is also possible I can get the owner to sell it in the mid $700's for a quick cash offer, but I am not looking to put the most optimistic spin on it.
Regarding the suggestion to finance or get a mortgage, that defeats most incentives for the owner to sell directly to me now, vs. listing it at the start of the new year. Plus I obviously want most of that $50k savings to come my way.
It is not so much I need to look at smaller investments, as I keep my eyes open for such things all the time. This place is one of those special deals that come along infrequently, especialy considering how I am already in this rental market which will help get the 3-4% returns until the market causes this place to reach it's full potential. For example these places were at 1.5 million before the housing bubble. I do not see them getting that high again, but 1.2 is very plausible.
As a side note, I missed out on a place in the Key's that I knew was a great deal. Sure enough, just a few years later, it's value has increased by 27%. Thus I like to stay within regions I know will not only appreciate, but can also make a return via rentals.
In this economy (unless you are good at investing in the stock market), you cannot get better returns that are safe than maybe 1-2% on say a jumbo 5 year CD.
This place will make the 3% minimum return after all expenses, all the while appreciating.
Lastly, as to the poster who mentioned renovation costs, I have this place pegged at $20-25K tops. I am pretty good at accurately estimating what it will take within a few thousand dollars.
My real estate/closing attorney gives me a great rate for private sales, so the $60k selling costs would not be the case, as I do not list with companies.
Anyway, keep the suggestions coming, especially places where I can find potential investors who like real estate investments.
So you aren't planning on flipping it until the market goes up? What if it goes down?
Must be a nice place as $20k-25k doesn't go very far depending on the size of the home which all potential investors still don't know. Also, what city are we talking here, or at least get us close
FYI the most expensive house that I flipped was purchased for $1.9 mil in San Francisco so I do have knowledge in this arena.
Lastly, as to the poster who mentioned renovation costs, I have this place pegged at $20-25K tops.
this seems extremely unlikely to me. Buy $1M house for $800k, make $25k in renovations, then sell for $1M-$1.2M ???
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