I ran some numbers and it looks like a terrible deal for an investor. Let’s compare it to the obvious alternative. Somebody investing in a rental property with a cap rate of 5% after all expenses. That way we can ignore the appreciation aspect of real estate (both investments would appreciate the same). So if you assume investing $275K and a 5% cap rate you collect $13,500 per year in rent. Here’s what 10 year of collecting rent looks like.
This lady is giving $75K in equity so what this means is right after year 5 as an investor you would have been better off just buying the property outright and renting it rather than entering this deal. In addition this investment is completely illiquid while a investment in rental property is liquid. You’d probably want a better return for the illiquid aspect of the the deal. It’s great for the lady is she can find an investor dumb enough to enter into this kind of arrangement.
