So I had an approved contract for my first very apartment building in Chicago.
I was on the road to becoming a mogul.
Great deal with a negotiated sales price of $85,700. The seller wanted $25,000 down and was offering 13% financing.
I had only one small problem: I didn’t have $25,000. But my cousin had $15,000 to be added to my $10,000, and he and I became partners. The seller was to finance the purchase at 13% interest for five years. That was good for him; he would have income from me at a hefty rate, and if I failed to pay in a timely manner, the building would be his to sell again, and I would forfeit my down payment and whatever payments I had made up to that point. The deal was also good for me: 13% was a lot cheaper than if I had borrowed from a bank or credit union at that time.
After five years, I either had to get a new loan and pay him off, or he could reclaim the building. (In real estate lingo, it was a land contract with a five-year balloon.) I thought this was a good gamble. I did not believe the very high cost of borrowing money would last forever.
I figured Ronald Reagan would whip inflation. Surely in five years I would be able to get a more favorable rate than even the 13% the seller offered.
My cousin had also agreed to provide the bulk of the down payment and a small contribution toward the repairs needed.
I could not have done it without the use of his private money and bringing him in as a money partner.
We closed on March 8, 1982.