THE PERFECT STORM TO BUY - Double$ - "OWNER FINANCE"
I recently bought a house in San Antonio, TX on Warhmund street
I paid $15,000 for the house and lot.
I did not mow the yard nor did I dust off the countertops inside...
I did nothing!
I borrowed $17,000 at 8% (PUTTING $2,000 IN MY POCKET)
I borrowed the money from a private lender at 8% annual interest,
interest only, for 5 years, payable monthly at $114/mo.
I sold the house in less than a week for $38,000 with owner
financing;
$38,000 with $3,000 Down @ 12% for 15 years.
I put the $3,000 in my pocket... adding it to the $2,000 extra I
borrowed (above)
These owner/occupants owe me $420/mo.
I pay out $114 to my private lenders who have a 1st lien on the
property I collect $420 from the owners who bought the
property from me on a "wrap-around mortgage."
Therefore, I cash-flow a positive $306/mo.
I've collected about 6 payments on time... 6 x $306 = $1,836
I have found a note buyer who will pay me for the full balance due
because they will make 12% on their money... my owner/occupants still
owes me $30,570
I will collect $30,570 from my note buyer by the end of the month.
So, with none of my own money, here is my income;
+$2,000.....Borrowed Equity
+$3,000.....Down Payment
+$1,836.....Positive cash-flow for 6 months
+$30,570...Note Sale
$37,306..... TOTAL INCOME!
-$17,000....Less the amount I borrowed
$20,306.....Net Profit in 6 months
Did I need good credit? NO
Do I have any of my own money in the deal? NO
Can you make money in real estate with none of your own money? YES
Is this Passive? NO
Is it passive for my note buyer? YES
Can you do this? YES
Are you going to have to get some education? PROBABLY
Mitch
I paid $15,000 for the house and lot.
I did not mow the yard nor did I dust off the countertops inside...
I did nothing!
I borrowed $17,000 at 8% (PUTTING $2,000 IN MY POCKET)
I borrowed the money from a private lender at 8% annual interest,
interest only, for 5 years, payable monthly at $114/mo.
I sold the house in less than a week for $38,000 with owner
financing;
$38,000 with $3,000 Down @ 12% for 15 years.
I put the $3,000 in my pocket... adding it to the $2,000 extra I
borrowed (above)
These owner/occupants owe me $420/mo.
I pay out $114 to my private lenders who have a 1st lien on the
property I collect $420 from the owners who bought the
property from me on a "wrap-around mortgage."
Therefore, I cash-flow a positive $306/mo.
I've collected about 6 payments on time... 6 x $306 = $1,836
I have found a note buyer who will pay me for the full balance due
because they will make 12% on their money... my owner/occupants still
owes me $30,570
I will collect $30,570 from my note buyer by the end of the month.
So, with none of my own money, here is my income;
+$2,000.....Borrowed Equity
+$3,000.....Down Payment
+$1,836.....Positive cash-flow for 6 months
+$30,570...Note Sale
$37,306..... TOTAL INCOME!
-$17,000....Less the amount I borrowed
$20,306.....Net Profit in 6 months
Did I need good credit? NO
Do I have any of my own money in the deal? NO
Can you make money in real estate with none of your own money? YES
Is this Passive? NO
Is it passive for my note buyer? YES
Can you do this? YES
Are you going to have to get some education? PROBABLY
Mitch
Comments (3)
Today the SAFE ACT comes into play on every deal if you're moving and shaking. I have taken all the precautions I know to take...there is no case rulings...every attorney has a different take. Hopefully by December things will lighten up.
Mitch Stephen, over 13 years ago
Josh, How do I clean this up? Sorry for the mess.
Mitch Stephen, over 13 years ago
Great example, Mitch. I take it this is the same kind of deal you've done many times? Does the HUD SAFE act come into play with a sale like this? Josh Dorkin, in case you read this do you see the formatting problem in Mitch's post? A bunch of coding interspersed through the content in various font sizes and colors? I see it sometimes on user blogs, but nowhere else.
Jon Klaus, over 13 years ago