A Real Estate Formula
It was a simple real estate formula. The ads ran in our small-town newspaper for years prior to I realized exactly what was going on. They were always the same: A house for sale with 5% down and payments of 1% of the purchase price. Maybe a three bedroom home for $90,000, for example, with $4,500 down and $900 per month payments and save money on mortgages. When a friend started doing the same thing he explained the process to me. It was a method to get a great return on capital, and it was the peculiar of buying with no money down. There is no down payment at all when you buy, because you buy for cash. The Simple Real Estate Formula You probably know that when you buy for cash, you can often get a much better price.
With no financing contingencies in the offer, and the promise of a faster closing, sellers are willing to sell for less. You can offer $95,000, for example, on a house that might be worth $108,000. If you can’t get it for less than, say, $99,000, you walk away – there are always different opportunities. Once you buy the house, you put few thousand into high-return repairs and improvements. These possibly could include paint, carpet, and maybe asphalt for a dirt driveway. For our example, we’ll say you spend $5,000. Let’s suppose the house is worth $116,000 now. You’re ready for the next foremost step in this real estate formula when buying your first home. You put it up for sale, targeting buyers who can’t get financing easily. You provide the financing. Because you are making it easy for the buyer, you can get more than the $116,000 value for the home – and do it without paying a realtor’s commission. Let’s say you sell it for 123,000.
The buyer needs a down payment of just 5%, or $6,150, and makes monthly payments of $1230 per month. You charge higher interest than the going rates at the banks, of course. This is a win-win scene. Your buyer is able to buy a home instead of renting, and you get a capital gain of perhaps $16,000 after expenses, plus recommendable interest. Your full rate of return will often be over 20%! In our town, the first to do this consistently were a father and son team of lawyers. They saved money by doing their own foreclosures when important. Once they foreclosed, they raised the price and sold the home all over again. They made millions. Did you know that if you can get an average return of 18% on your money, you’ll turn $75,000 into more than one million dollars in about fifteen years? That’s the power of a favorable real estate formula. Other Articles: 10 Ways To Find Investments Properties Choosing A Property Manager For A Vacation Rental Home Choosing A Real Estate Agent Tagged with:real estate Filed under:BlogKnob Like this post?Subscribe to my RSS feed and get loads more!