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MKHG Real Estate
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Case Study 3: A Creative Deal

This is taken from Ebay listing #2397125702.  This is a three bedroom, one bath house in Arizona listed at $69,000.  The unit currently has tenants that pay $450 per month.  According to the listing, taxes run $320 a year. The listing does not mention the need for repairs so we will exclude them from our  calculation.

Lets see if the Real Estate Offer Generator can determine whether or not this is a good deal.

The first step is to determine what our Net Operating Income is by taking into account the rent, all the expenses including management, maintenance, and vacancy reserve as well as a return on our down payment and any required repairs.  The Net Operating Income is computed in the
Net Operating Income screen.

After the NOI has been computed and adjusted for the return on the down payment the next step is to see how much can be offered for this property so that we can still get our desired return and meet all expenses.  This calculation is done in the Offer Generator screen.

As you can see most that can be offered is $46,479 at a 7.5% 30-year fixed mortgage.   This is far below the asking price and probably won't be accepted by the seller.

As a successful real estate investor this is where you get creative in order to make both you and the seller happy with the deal.  The example below shows a deal where 50% of the financing is done via a bank mortgage and the other 50% is financed directly by the seller at 0%.



As you can see, you have more than met the seller's price (in fact you can offer over $2,000 more than the asking price) and you still stayed within your financing terms which makes your investment cash flow positive.

More Case Studies

bulletCase 1 - A good deal
bulletCase 2 - A bad deal

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