I would be grateful for any experienced input on this strategy. Not only if it works, but if it is a reliable strategy to use and the real life potential as opposed to the hyped writing I have just read.
I finished reading the book Making Big Money Investing in Real Estate by Peter Conti & David Finkel.
This particular strategy is to purchase a real estate valued at $200,000 with a 6 year lease for $1,500 a month and an option to buy in 6 years for $200,000.
Then turn it over immediately with a 3 year lease for $1,850 a month and purchase option for $236,000 ($200,000 + (6% * 3 years)) with a front payment of $10,000.
The $10,000 is used to pay anything that needs to be financed for upfront or just a nice bonus for the buyer. Of course these numbers can be tweaked to give the seller more “motivation” to sell and or give the investor a better buy for bigger profits.
The authors give a “secret hint” to add to the contract a clause which states the investor (buyer) will not be obligated to the first lease option contract until a tenet is found.
Hopefully this is understandable.
It may work if the sellers are willing to offer below market financing, have a lot of equity and don't need the money now. 30 Year loan at 6.5% is 1264.00 P&I only. The way most people have take 2nd, 3rd and a flex line you are not going to find a lot of people that can afford to wait 6 years to cash out.