Hundreds invest in real estate – but how many enjoy real returns from this? The smartest and fastest way to amass wealth in Real Estate Investment is through Owner financing, or Lease optioning. Here is an example of a successful contract involving the purchase and sale of two properties on lease-option contracts, which is for you to study and implement profitably in your business.
First of all, let’s assume that you have enough money to invest in a property. Suppose you invest in property worth $50,000 to $60,000. You now sell it on a lease-option contract for $80,000. The buyer hands over $4,000 as down payment, and will pay the balance in 12 months. You create a note for the remaining $76,000, and receive $570 monthly, as interest-only payments at the rate of 9%. If you keep this property for a year, your earnings increase by $7,000 as interest payments. The next step is to find a rental rehab property in an inexpensive neighborhood. Offer $3,500 as 10% down payment of the total $35,000, promising to pay off the loan in 13 months or less.
Now, let’s see where this is leading us. As down payment for the second property, pay the $4,000 that you received from the first property - you don't have to come up with your own money for this. Offer to pay 8% on the remaining $31,500 which comes to monthly payments of $231. Make sure that your agreement allows you to defer your first payment for 30-60 days. After 13 months, you can sell the house. Let us assume, you cannot sell your house (which is just an assumption, of course!), you’ll have the cash when the $76,000 balloon payment comes due in 12 months. With this amount you can pay off your second house in 13 months. So, there –you neither lose any of your own money, nor have to look around for other financing.
When you are using this approach, you are always having yourself covered against financial risks. Invest a few thousands on your second house and resell it in a few months. If you play your cards right, you can make a nice profit on the resale. Through the sale of your first two properties, you will end up making around $30,000 to $35,000 a year. Apart from this, include the extra thousands of dollars in interest you are making on the payments you're collecting. So, there you are – a foolproof way towards wealth and success.
- Real Estate Flipping
- Property Investing
- Cash Flow
- Opportunity Cost
- Real Estate Investment Research
- Financing Real Estate Investments
- The Perfect Real Estate Investment?
- Real Estate Investment Expert