A funny thing happens with $500k houses . . . - Posted by JoeKaiser
Posted by JoeKaiser on April 18, 2002 at 24:18:02:
Can you work it backwards? In my area $250k houses rent for $1500 and someone who didn’t know better might assume that a $500k house, being twice as expensive, would rent for $3,000.
Nope . . . probably rents for something like $1,850 or $2,000.
Now, if that same $250k house has a mortage of $200k principal and interest payment of $1200 a month, our $500k house, with a $400k loan at the same interest rate does in fact have double the mortgage payment, or $2,400 a month.
Which means, in my neighborhood anyway, it’s cheaper to buy a $250k than it is to rent it, but it’s cheaper to rent a $500k house than it is to buy it.
If you could get a lease and option on the place at the normal rental rate, you could then turn around and “sell” it at the normal “sale” rate, you’re talking cashflow.
Get a lease and option on it as cheaply as you can and then turn around and sell it on owner financing that has the words “lease and option” somewhere near the top of the page (it’s simply a matter of painting the picture for the “buyer”), and cashflow happens . . . big time, (as Dick Cheney would say).
In other words, in my town, I can rent that thing for $2,000 a month and turn around and sell it at, say . . . what would be equal to maybe 10% interest. Don’t have my calculator with me, but I’m guessing it’s “substantial.” Anyone care to work the numbers?