Dealmakers Blog – Ramblings of a Real Estate Mogul

YES!  Owning Positive Cash Flow Properties

I get asked all the time “Is there a real estate investment that is recession proof?” The answer is YES! During an economic downturn the best real estate investment is the one that will sustain itself for a length of time.  Buying positive cash flow properties is not only a great avenue to build net worth but also can provide a monthly income to offset any revenue lost from other sources.

I have looked all over the internet for programs similar to our Fortress Investor model and I have only found a handful that offer investors turn-key properties, most of which require a 25% down payment. 

Here’s an example transaction of how our program works:

Property Value: $200,000
Purchase Price: $157,500 ($7,500 Down Payment and $150,000 Seller Financing)
Terms of Seller Carry: No Interest 45 day Balloon
Property Type: Fourplex
Property Condition: Fully Renovated
Property Status: Leased Up with 3 Month Rental Guarantee
Monthly Mortgage Payment: $1,225/mo ( $6.5% 30 yr Term Includes Taxes and Insurance)
Expenses:  $530/mo
Income: $2700/mo ( Includes 10% Vacancy)
Total Before Tax  Monthly Cash Flow: $945/mo
Total Before Tax Annual Cash Flow: $11,340
Total Guaranteed Equity: $50,000
Security Deposit & Rents Assign at Closing: $6,000
Total Out of Pocket Cost of Purchase: $1,500

If you are wondering how this would compare to a traditional purchase, Mike put together a spreadsheet you can see HERE. It’s a very simple transaction which entails a 2 step closing.

Step 1: Fortress will sell the example property to the investor for $157,500 of which $7,500 is the down payment and $150,000 is short term seller financing. The investor becomes the owner of record after the closing is complete.

Step 2: The investor does a “No Season Rate & Term Refinance” at 75% of the banks appraisal.

With this model the investor acquires a turn-key property for a fraction of the out of pocket cost of a traditional transaction.

So is this investment recession proof?  Yes, it doesn’t matter if the real estate market is in a downturn because you’re able to collect positive cash flow every month, and when the market does turn around you will be able to sell into a strong market if that’s the long term goal.

If you have a burning question, please don’t hesitate to ask by leaving a comment below and Mike or I would be happy to help.

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