For buy and hold investors . I think?

2 Replies

Let's say I'm the investor and you're the seller. You want to sell me your house for 545k and take over the loan then buy it back for 650k in 4 years. The loan is now covered by me, and you rent my house for 2500, but the mortgage is 3500. So at this point , I'm covering the extra 1000 per month. At the end of 4 years I have now paid 48000 and you now want to buy the house back. You buy the house for 650k which means over 4 years I've invested 48,000 and made 57000

Adding the assignment fee, let's say 10k, and the buyer has now profited 47k In 4 years from investing 48k , about 10,000 a year. Would people be interested in that? Maybe buy and hold investors? A lot of people are saying this wouldn't work can someone please explain why? Because for people that buy and hold I thought their return would be at the end of the hold, not Necessarily cash flow.

And what about the risk? Let’s say it’s worth it. But at the end they opt out of buying it back. What happens at that point with the investor and the house? I think that makes sense the way I explained it.

They’re a so much info I’m trying to grasp sorry if this is an obvious question.

@Gabriela Johnson it probably wouldn't be popular because it isn't more profitable than just owning the house, it is also somewhat complex and needs to be monitored.  The complexity limits you to only sophisticated investors, most of whom if they are investing in buy and hold would prefer a set it and forget it approach where the property just does its thing for 30 years until the mortgage is paid off.

@Gabriela Johnson I think there are a couple red flags. The major one is that what investor wants to pay 10k for a deal that they are going to LOSE $1,000/month on? To rent to the original owners who cannot afford their payments. The second major red flag is that there is no certainty that the “renters” will buy back in 4 years at that price. What if market tanks and property is not worth that much? What if they cant qualify for a loan in 4 years? There are so many factors that lead me to believe that its a HUGE risk. Also you said that the investor makes 57k in 4 years (maybe) plus the 10k they paid for the “deal” and the 48k LOSS that they have to take for 4 years...if you do the math 57k-48k-10k= a LOSS of $1000. It sounds like this isnt actually a deal. Ask yourself if you would do this deal with your money. That answer should tell you everything right there. These numbers are terrible.