How To Actual Buy A Cash Flowing Property - Financing & Profit Go Hand In Hand

[Ken M.]

Say you wanna be a real estate investor, In a typical purchase:

Let's assume you follow the normal financing route, you want to buy a $400,000 property so you need 20% (or $80,000) for the down payment. Then you need a few thousand for closing costs and you need a few thousand for "concessions" and you need "good credit" to get the deal to "close". It's easily $85,000 smackers just to buy the property and you get 7% interest so your monthly payment on $320,000 principal is $2,129 plus taxes and insurance. Hard to make it cash flow.

Now let's compare creative financing, Subject To in this case and the seller wants some cash up front, for you to take over the loan payments and it's yours. No bank qualifying needed. Well, generally I give the seller (10% or $40,000) and we do a close that doesn't have lender fees, no loan origination fees and no concession fees and I take over their 2.5% interest loan which on $360,000 is $1,422 a month plus taxes and insurance. (It's better than that, which I'll explain later)

Nice! So I'm actually comparing $2,129 (bank financing) minus $1,422 (creative financing) which is a savings of $707 a month. Pretty cool. That cash flows nicely.

And, instead of spending $85,000 to use the bank, I end up only needing $40,000 to do the same transaction, No Bank Needed, and my wife and I go on a trip with the difference. Or, we buy another property.

Spreadsheet that explains this, available on request.