I am as green as a gourd when it comes to the concept of flipping houses and buying subject to and exiting loan. I have read a few thousand pages on these subjects including these forums. I am about to go all out, full blown with advertising next week…Spending a lot of money on ads. The following is a hypothetical or simulation deal. I am mostly interested in streaming income. I would like to rent these properties / sell on Land contract.
Seller has 30 year mortgage with a balance of 104,705.
110,000 is the original amount of the loan in 2001 at 8.25% with a monthly payment of 826.39 PI and 145.00 TI. Seller has total payment of $971.39. Seller is 5 payments ($4,856.95) behind and in foreclosure. To bring Mortgage current:
Late fees 325.00
Attorney Fees 675.00
Total is $5,856.95
The house is in good shape, other then needing Paint, carpet, cabinet facings and tile in the bathroom for the total repair:
Misc $ 500
Total $4,500.00 plus or minus 2-3%
The house appraises at 129,000 Low and 145,000 high in its after repair value. I offer the seller $4000 walking expenses with a 3 year subject to with land trust with trustee as third party LLC non-profit. So thus far I have:
To Sellers Bank $ 5856.95
To Seller $ 4000.00
Repair cost $ 4500.00
Carry cost $ 971.39
Misc $ 500.00
Total $15,828.00 Plus or minus 4-6%
Total expenses for taking this property are $15,828.00…this is the total cost. I pay the mortgage down to bring it out of foreclosure.
Seller Loan balance (current) $ 104,705.56
All repairs and holding costs $ 15,828.
Agents commissions (6%) $ 8,160
Capital gains tax of $10,300.00
Total net expenses $ 138,993.56
Sell amount with broke/real-estate agent $136.000
Total profit of ( $ - 3000 NEGITIVE )
Capital gains and agents commissions kill me.
Now of course this looks much easier on paper then in a real world scenario I know. As I said in the beginning of this pipe dream was that I am mostly interested in streaming income.
So here is the rent land contract scenario :
I advertise and do the selling myself …I advertise as a no qualifying, bad credit ok, home with $6,000 Down on a 2 year contract at 10% interest on an agreed price of $144,000
My buyer will be financing $138,160.00 with me at 10%.
There monthly payment to me will be $1,212.45 PI
There Monthly Tax payment will be $ 145.00 TI
TOTAL $1357.45 Per month
I will still of course be making the mortgage payments from the original seller.
I still have $15,828.00 tied up in the property.
My buyers payment $1357.45 to Me.
My obligation of $ 927.39 to mortgage and taxes of original seller.
Total of $430.00 a month Positive cash flow
Times 24 months = $10,320
Now I will be paying $927.39 a month for 24 months so the amortization will be:
$101,936.96 at the end of 2 years.
Figuring my buyers amortization will be:
$136,468.99 at the end of 2 years.
Total difference of :
Subtracting $15,828 (what I have invested in buying out original owner and repairs)
Total of: $18,704.03
Subtract capital gains - $ 4,800.00
Times 24 month payments over the last 2 years + $10,320.00.
Plus $6000.00 that was the down payment $ 6,000.00
Total profit of $30,224.03 .
I would like any feedback on this that anyone can offer, Good or bad if you think I am an idiot then say so and tell me why. Was I right about capital gains? Did I miss something very important. Tell me if you would write this deal. Please tell me why you wouldnt’.
Sorry it is so long and boring
Thank you for your time.