This is a completed
positive cash flow investment
for someone wanting a
good annual return on
a no work property.

This property was completely rehabbed in December 2008, currently under lease with a guaranteed government subsidy and under professional management. It cash flows positive and will be sold on a basis of providing the buyer a return on investment based on the following conditions:

The property is located in Detroit, MI (see comments below).
The property will NOT be sold based on local financing secured by this property. There are three ways to appraise a property. Sales comps are used by banks and based solely on actual local sale prices. Income value is based on income derived, net profit and Return on Investment. Replacement costs is based on leveling the property and rebuilding or replacing it. Local financing must be based on sale comps of buyer/occupant homes and not on the basis of income. As such the local area has too many foreclosure sales for less than $10,000 to give any fair evaluation to this property. Therefore income valuation is used. Financing must be against a different property such as a HELOC with the proceeds used to purchase this property. The return will pay off the HELOC as if it was against this property.
The property can be 100% financed to reduce the actual out of pocket cash to $0.
For evaluation purposes, a 5% cash out of pocket + 95% financing is considered.
Title can be transferred in two methods. One which will require no closing costs. The other will involve closing costs of approximately $2,175 which you, the buyer must pay.

Street Address, City, St Zip			15338 Prevost, Detroit, MI, 48227
School Ranking	View
Crime ranking	View
Sq. Ft.			827'
Sale Price	View	$70,000.00	Price is based on income appraisal, not local sales comps.
Considered DP		$3,500.00	This property should be 100% financed but for computation purposes of Return on Investment a 5% down payment is considered. Otherwise all ROI would be infinite
Current Income (monthly)	View	$850.00	Lease with Section 8 subsidy. Quality tenant understands the need to avoid eviction due to loss of subsidy and removal from program. Rent is paid in two parts - Government check and tenant check each month to assure receipt.
List of Expenses: (monthly)
Management	View	$85.00
Taxes	View	$163.06
Insurance	View	$69.42
Misc. Exp.		$25.00	Rehab just completed full repairs and upgrades to property and passed City Inspection. No maintenance or repairs are expected for next few years. Passed City Inspection.
Net Income (monthly)		$507.52
Utilities		$0	All paid by tenant
Mortgage Payment	View	$419.69	Computed at 6% for 30-year fixed with 0% down payment.
Mortgage Payment	View	$398.70	Computed at 6% for 30-year fixed with 5% down payment.
Net Income		$87.83 to $108.82	Positive cash flow AFTER payment of all expenses + mortgage payment
+ Cash/year		$1,053.96 to $1,305.84
Return on Investment 1		37.3%	Computed on 5% down with actual down payment and $66,500 mortgage
Return on Investment 2		30.1%	Computed on 5% down with $0 down and 100% financed on $70,000 mortgage. If a true $0 were used in computation, the return would be infinite
There are 3 basic ROI - Income, Depreciation tax return, and Appreciation. Due to the low purchase price and property assessment depreciation is not considered. Due to today's economy appreciation is not considered. The ROI above is solely from positive cash flow from the property.

Purchase Strategy

Since this property will not be subject to local financing it must be paid for by financing from another source. The best and least expensive way would be a Home Equity Line of Credit (HELOC). Doing this allow the buyer to determine if they want to pay the 5% actually out of their pocket (savings account, CD, investment trust, etc.) or finance the entire amount. Doing this will most likely result in a smaller interest rate near 5% which will decrease the mortgage payment and increase the net income and ROI In either case, the income will be enough to pay the monthly mortgage payment on the HELOC. If another non-owner occupied property is used as collateral for the loan the interest rate may be higher and increase the mortgage payment and decrease the net income and ROI.

The title to this property is held in a land trust. This is essentially the same as a corporation without the requirement of filing ownership information to any state. All income is passed through to the "Beneficiaries" which are like stock holders without taxation. This provides the most complete control plus privacy of any legal method available. The current trust already has a free bank checking account that can be transferred to a new owner (many banks do not provide free checking for business accounts).

Sale of a land trust involves the simple sale of the beneficial interest (stock) on a simple Bill of Sale single page form. Since the title insurance and insurance is current on the property deed and there is no change in the "ownership", only a change in the trustee authorized to sign documents and transact business. As such there is only one recorded document which is a notice of change of trustee recorded with the country recorder (usually about $25.00). The buyer must have a trustee, who can be anyone, not named as a beneficiary of the land trust (owner of stock). This process is essentially simple to arrange and run. We will provide all the documents you may ever need, training in the process and handling of the land trust and advice on how best to set it up for your particular situation.

If you select to remove the title from the land trust, this creates a "Normal" sale of property and all title insurance, closing costs, expenses, etc. associated with such action will be the buyer's responsibility.

Interested? Contact us at SeniorDirector@IHLPro.com

Investment Property For Sale

Purchase Strategy