Feedback On My Plan - Posted by Neil (MD)

Posted by Neil on March 22, 2000 at 23:06:52:


Feedback On My Plan - Posted by Neil (MD)

Posted by Neil (MD) on March 21, 2000 at 11:06:42:

After months of reasearch,many books read and a lot of time reading this newsgroup, I’ve begun to formulate my foray into real estate. I’ve decided on this plan of action.

  1. Buy a house through seller financing (hopefully avoiding due on sale clauses)
  2. Sell the house through seller financing
  3. Make money on the spread

Here is an example of how I would structure this:

Let’s say I buy a house at FMV of $100,000. I get the seller to finance the house over 30 years at 9% (maybe I put a couple percent down, maybe I don’t) I then resell the house at 100,000. (I’m using a worst case scenario here, I would hope to buy lower and sell higher). I finance the seller at a 13% interest rate after he puts a couple percent down. I make money on the spread, in this case(assuming no money down on both ends), it would be $302 per month (i’ve not included closing costs).

My questions are?

  1. Is this a suitable structure for my business model?
  2. If we use this example, is the payoff worth the risk of having to foreclose?
  3. Am I making assumptions I don’t know I’m making?
    4 When I sell, should the deal be structured as a 1st and 2nd mortgage so that I might have some resale ability on the 1st mortgage?
  4. Are there plenty of buyers who have not been able to get credit that would be interested in a deal like this?
  5. Should I charge a slightly lower interest rate, but increase the selling price, so that if it gets paid off early, i’ll at least make a profit?

Any other input would be great!

thanks for the help in advance

Neil (MD)

More feedback - Posted by Nancy Cason

Posted by Nancy Cason on March 22, 2000 at 16:51:48:


Try John Schaub, he is a doer and a teacher. His web site is His newsletter is cheap and well worth the cost about $47.00, 6 issues per year. His tape sets are reasonable also and come with a booklet and sample forms.


Re: Feedback On My Plan - Posted by Nancy Cason

Posted by Nancy Cason on March 21, 2000 at 11:31:39:


You pose some good questions.

I am not going to attempt to answer all of your questions. However I will offer some food for thought.

Why would you want to sell zero down? People with no investment in the purchase will walk away sooner.

Why would you want to sell at exactly the same price as you purchased? You need more spread than just the interest rate. A spread on price should be included in your plan.

If you are assuming a worst case purchase/resale it still is thin if you have no financial cushion to take a loss. (All losses hurt, if not the pocketbook the pride.)

All in all I think you are on the right track from the questions you ask.

I have never bought a house with seller financing so I cannot help you on that end. I did buy one at foreclosure and sell with owner financing. I doubled the price, sold at 9 3/4% for 15 years. After 5 years I had my initial investment back and the remaining 10 years is all profit.

Each deal is different. The most important thing is ACTION. You must take action. Start talking to sellers and don?t give up.