Re: First Deal Help!!! - Posted by JohnBoy
Posted by JohnBoy on March 21, 2001 at 23:09:50:
If you want to get $18k - $20k out of this and still collect some cash flow coming in every month…then instead of renting…sell by offering seller financing and sell on contract.
Refinance the deal at 80% LTV. That would get you $57,600, leaving you with $10k cash after paying off the construction loan.
At 8.5% interest on a 30 year loan that would put your PI payment at $442.89 per month, plus $240 for taxes for a total payment of $682.89.
You say the house is worth $72k. Since you’re offering SELLER FINANCING, you could probably get about $80k for the property!
If you get $8k down from the buyer you now have the $18k you wanted to get out of this. $10k from the refi and $8k from your buyer.
Now you finance the balance of $72k your buyer owes at 12% amortized over 30 years with a 2 - 3 year balloon payment due. When the balloon comes due your buyer either gets a new loan to pay off the contract OR you can write up a new contract and extend the term should they not be able to get new financing. Should this happen, you should include a clause in the original contract that states in the event you agree to write a new contract that their will be an increase in the purchase price based on x percent and that amount will be financed over 30 years with a balloon due in 2 - 3 years.
Your buyers PI payment at 12% interest over 30 years would be $740.60 plus $240 for taxes, plus about $40 for insurance, for a total PITI payment of $1,020.60!
$1,020.60 - $682.89 = $337.71 per month in positive cash flow!
Assuming your buyer was to get a new loan at the end of 2 years, their pay off amount on their contract would be $71,444.32.
Your pay off amount after 2 years on your loan would be about $56,690.74.
This would leave you with getting $14,753.58 at closing!
So your total profit on this deal over two years would be:
$10k up front from the refi.
$8k up front from the buyers down payment.
$337.71 x 24 months cash flow = $8,097.84.
$14,753.58 at closing on the back end.
Total profit = $40,851.42!!!
If you were to just sell this property out right for $72k, your profit would only be $24,400.00. ($72k - $47,600 = $24,400)
You make an extra $16,451.42 on the deal by refinancing at 80% LTV…selling with seller financing for $80k, getting $8k down and carrying the balance at 12% with a two year balloon!