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Multiple Ways To Make $25k On This Deal
Joe: Hey, it’s Joe. This is another video in the series of hypothetical seller situations where you can make zero down offers and different ways you can make those offers so you can understand the best type of offer to make for any particular situation. Because you can make money on any of these types of deals if you do it properly.
Joe: All right. This property is a cheaper one. We’ve talked about high end properties, we’ve talked about low end properties. This one is a $35K asking price. It’s got a value of $55K. They don’t have a mortgage on it right now. If it’s done, if a little bit of repairs are done on it, you know, a few thousand dollars of repairs, it could rent for $550. It’s habitable as it is. It could be rented as it is. It’s not like missing a furnace or anything. Just is old and smells and it’s got old carpet and needs paint and everything’s avocado green or something – I don’t know. So it’s in rentable shape.
Joe: So, one of the ways that you could do this, and let’s say the lady just wants to get rid of it and she’s going to move into an apartment, she’s, you know, she’s not able to take care of the property anymore. And she’s getting up there in years and it wouldn’t hurt her to have a little bit of income. So, what you could do is make her a zero interest land contract purchase on this property, or you could do multi-mortgage on the property as well, where you actually put a mortgage on the property that you’re going to be making payments, even though she’s deeding you the property. And you’re going to be paying her $35K over 7, 8 years, maybe $300 a month over that period of time. And you’re going to pay taxes and insurance, which maybe cost another hundred dollars, so you’ve got about $400 a month going in, you’ve got $550 a month coming in from the rent, so you’ve got $150 a month cash flow, but all that $300 that you’re paying her is going toward principal. So that’s all profit to you. It’s not just in your pocket profit.
Joe: Plus, you’re going to find a lease option buyer since it’s worth $55K, you’re paying $35K, you’re going to sell it for $60K. Ask for $5,000 as a down payment, as a lease option fee, nonrefundable, and they’re going to be paying you that $5,000 plus they’re going to pay you the $550 a month for that property and you sell it on a lease option as a fixer-upper, even though it’s habitable, you still call it a fixer-upper and then you warn people when they go over there and say, look, this is, this property smells like a dog, it’s awful, the carpet’s terrible. You’re going to hate it. But, it’s a pretty good deal and it could be a pretty good long term investment if you’re willing to do some work to it.
Joe: If people go in and they think it’s nice, and it stinks, they’re going to, it’s going to hit them in the face and they’re going to – Oh – you know, this is terrible. But if they go in there and they think it’s terrible, and it’s not as terrible as you tell them it is, then it’s going to lower their expectations and they’re going to say, well, it’s not as bad as we though. Yeah, it smells like a dog, but, we can deal with that. And so they go in and they can take that property and be comfortable taking over that property. And they can go in and do the work.
Joe: So that’s one way that you can do it. And, or, you could keep it and you could rent it, or you could sell it to another investor, you know, say you raise it up to $55K and you sell it to an investor, make them come up with $20K and then they have $35K that they can do a note on and they’re going to be making $150 a month positive cash flow on it plus you can then put a lease option tenant in there, make it turnkey package for them, so they’ve got a good return. On their $20K they’re making $150 a month plus $300 so they’re making $450 a month on that so that’s about, what, $5,000, let’s just say approximately $5,000 a year income on the money that they’ve got which is about $20K into it. That’s, you know, that’s 25% return on their investment annually. For an investor that’s a good deal for them. And you made $20K in cash on it, and, well, $25K because you got the least option fee from the buyer as well. So there’s a couple of ways that you can make money in a deal like that. Could be really a beautiful, a beautiful deal.
Joe: Again, this is going to be in a low end market, either an urban market, or a rural market, on a lower end price range.
Joe: All right. Hope that helps.