Good idea for a quick cash profit? - Posted by Rob (CA)
Posted by Rob (CA) on December 23, 1998 at 23:55:27:
- Obtain a lease/option on a home
- Rent out each room in the home individually
- Sell the lease/option to an investor like a discounted mortgage
Example: In my city a 4+2 house rents for around $1100 and the average room in one of these homes rents for around $300
with the master bedroom going around $400-$450. Now lets suppose that I work a 5 year lease deal with Joe Leaser for $300 and pay him $1000 per month on it with the “OPTION” to buy it for the current balance of the mortgage in 5yrs/60mos
Meanwhile I rent the rooms to four guys Joe, Tom, Dick and Harry Rentor. The first three grab the three regular rooms at $300 each and Harry splurges on the master bedroom at $425 per month this means a total rent of $1325 per month and a lease of $1000 per month that is a positive cash flow of $325 per month if all variables stay in place. At this point sell the lease option to an investor for $2500 with the tenants already in place and make a relatively quick $2200 cash profit and the investor would have an already running money machine. Now the investor would have some risk of repairs and the tenants moving out, but if he keeps the rooms full(maintain the money machine) he would stand to collect a total of $19,500 in revenues from the amount of payments made above his lease all on an investment of $2500 ($17,000 profit, minus any repairs or other expenses that may come up along the way) which would make his possible yield astronomical! And he would have made me $2200 on a $300 investment plus some advertising.
Now I am a pretty optimistic person whose youth can interfere with realistic judgements. The reason I am posting this is because I haven’t seen any articles on this sort of real estate maneuver and I was wondering if some one could tell me what downfalls (if any) would be severe enough to avoid this type investment. I feel like I know much more than most other 21 year old college kids do about real estate and finance but that is not saying much!
Any advice would be very appreciated!
Thank You, Rob