FLIP using PRIVATE MONEY & OWNER FINANCING
@James Hiddle
I think we're not on the same page Hiddle.
I don't think buying a house for $50,000 and then selling it for $100,000 is a crappy deal.
Here's an example of a typical deal for me...and I've done this many, many times... over a 1,000 times...using private money and owner financing:
$50,000 acquistion price
I borrow $53,00 from a Private lender @ 8% interest only,5 yrs, none -recourse loan.
My Monthly payment = $353~
$3,000 just went into my LEFT POCKET
I DO NOT FIX UP HOUSES
I owner finace the house for $100,000
5% down.
$5,000 just went into MY RIGHT POCKET
By the way, you don't need an appraisal to owner finance, nor an ispection, nor a credit score. The Seller and the Buyer decide if there is a sale or not.
I finance the $95,000 @10.5% for 30 years
Their payment to me is $869 P&I
The difference between what I owe and what I'm owed = $516/mo.
SUMMERY:
I got paid $8,000 to create a $516/mo positive cash flow.
The new owner begins to repair the house (I took a small down payment because the house needed work...you really couldn't hurt the house much...except to leave it vacant).
When the onwer finished the repairs the house becomes worth more like $120,000
I sell the note for %93,000 cash because the disparity from between the note balance and the owner financed sale price is so great you don't need to take much of a discount. If I sell for $93,000 and I owe $53,000 I will clear $40,000.
I think $40,000 is a long way from crappy.
So...call it a crappy deal..but may I suggest that if you can do this 20 times and you make $160,000 up front and create a cash flow of over %10,000 per month...while you go to work on collecting 20 x $40,000 = $800,000
$10,000/mo gives you cash flow as if you had $1,000,000 in the bank at 12% annual interest. And what active RE investor worth his salt can't earn 12%?
In short...it makes you a millionaire on paper. In fact, your $160,000 collected in down payments + 1 year of collecting payments ($120,000 annual income) added to what you can sell your notes for ($800,000) make you worth right around $1,000,000
I like it!
NOTE TO SELF: How much of my money do I have to have to do these deals? ...ZERO!
So the rate of return is as good as it gets.
Now, not every deal you do has $50,000 srpead. I only used this example $50K$100K because you thought it was "Crappy Deal." I did very well when my deals only averaged $20,000 to $35,000
Spreads.
--Mitch Stephen--
--Mitch Stephen--