question

5 Replies

hi

i'm really new with real estate investing. i havent even begun to own anything because i'm still reading n'stuff. but i have a question, and it could possibly be a dumb one, but i dunno, so bear with me. you buy a property and, you know, you have to pay your lenders over 20-30 years. but let's say after 7 years you plan you sell this property. do you still owe the lenders for a property you don't even own anymore? im really really sry if this question is dumb or doesnt make any sense. i've only been reading about real estate for like 6 days. :oops:

The more questions you ask, the more you know so don't ever be afraid to ask questions. Hopefully the day will come where all of this makes sense.

When you sell your house hopefully you do so at a level where you can pay back the bank the money you borrowed from them at the start. For example if your house costs you $100,000 when you buy it and then seven years later you sell it for $110,000, basically you pay the bank back their money ($100,000) and you keep the $10,000 for yourself. Hope this helps a little. This is a very simple view of how selling a property works. There are a lot more details about houses appreciating or growing in value and about paying down a mortgage, but this is a very basic answer to your question.

hillbillywilly

NO_1,

I think your question is outstanding. If you keep asking all of your questions you will gain more knowledge and confidence to take the important steps to successful investing. The people that don't ask questions because they are embarrassed are the ones that will never do anything because they never got the answers they needed.

What better place to ask questions like this than an internet board. Nobody knows who you are - so ask away. Great job.

Great response Bryan. I agree, there are no bad questions. I've only got about 1% of the knowledge I would like to have about RE so I'll continue to poke my nose around here, read something else there and hopefully I understand to the point where I'm comfortable making decisions on my own properties and helping those that need some guidance.

hillbillywilly

lol, ok great. thanx guys! ok so the money you make when you sell the house goes to the lenders. but what about when buy'n'flip property? if you bought and flip it so quickly,you've paid the lenders, then that couldn't be such a great profit. or unless u know that,right?

The lenders only get back what is owed to them. If they loaned you $100K and the outstanding balance on your account (the outstanding principal) is $98K when you sell, the title company will give them the first $98K of your proceeds and you will keep the rest.

As an example:
- Buy a house for $120K and put $20K down. The lender is giving you a $100K mortgage on the property.
- Fixup the house (total of $10K in work) and sell it for $150K (no Realtor fees on this one) only 3 months later
- Lender will get their $100K back and you get the remaining $50K.

After you pay yourself back for the $20K you put into the deal and the $10K for fixups, your profit is $20K.

Does that clear it up? If not, just ask your next question.

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