Confused about private money interest rate example in BP book

[Travis Beatty]

I’m reading through “Investing with No/Low Money Down” and am struggling to understand private money interest rates, specifically the example on page 101.

Investor receives $130K, for a five-year term at 8%, interest only, which comes out to $866.66 per month. Several years later the investor sells the property for $190K, clearing a huge profit.

I believe I understand where the monthly payments come from, ((130,000*.08)/12), but I don’t understand how the investor clears a “huge profit.” Five years of monthly payments at $866.66 per month = ~$52K. Add in the original $130K and the investor would only net 9K from the sale. Would the book be referring to the 9K plus what she cashflows monthly from rents?

TIA. I apologize if this is confusing. If this is posted in the wrong forum please let me know and I will take it down.

[Alex Breshears]

@Travis Beatty - I am not particularly familiar with this paragraph specifically so I am going to work of the example you provided in your question.

First - the 5 years of interest only payments are income the lender has already received (or the borrower has paid). If the loan is ONLY interest only payments, then the original principal balance would be $130k because all the payments have gone towards just the interest on the loan.  If the property sells for 190k 5 years later, the borrower still owes the $130k (and ignoring closing costs) the owner that sold the property would get to keep the different between the sales price and the liens on the property, so the $190k (sales price) and the $130k (lien on the property), which would be $60k net. Depending on which party you are considering "the investor", both make a pretty decent return. The investor that is acting as the private lender has received $52k in interest payments AND will receive their $130k principal balance. The "active investor" will also make out well because they (hopefully!) have been collecting rent and then keeping the difference between what the tenant paid and then what they have to pay out to the lender for the interest only payments. This happens over the course of 5 years, and then when they sell the property they net that $60k difference between $190k sales price and $130k lien on the property.  I hope that helps!