So I took the knowledge that I learned and modified it a bit. I started advertising on my website that I was going to try and buy as many homes as I could.I told people that if they could put at least $5000 down, I would put down the rest. They would be able to pick whatever home they wanted.
They would be in charge of all the maintenance, utilities, and repairs. Just as if it were their own home.
Immediately my phone started ringing off the hook. Rent to own deal number two was on the way.
A small family wanted to buy a home. The agreed to put $5000 down, and pay $1100 per month on a home that I bought for $122,100 with my closing costs rolled into the loan, and immediately put the price at $130,000 12 months later.
I like the fact that people put down $5000 because that shows me they have some skin into the game.
I bought and sold the home the same day using a lease purchase contract with the option to buy.
It was a good deal for them because they couldn't buy a home any other way. It worked out for me because I got paid $3660 in commission just for buying the home. They gave me $5000 option money, and the first months rent of $1100. Also, equity pay down was actually about $100 per month times 11 months, even though it was an interest only loan. Not sure how that happened.
This comes to $10,860 right from the get go, with no money down.
Have you ever created money out of thin air?
Can anyone tell me what my rate of return is where I invested zero to make $10,860?
Holy crap Batman! I thought I was onto something.
I got a 100% interest-only loan. This was one of the last interest-only loans they offered. The reason I know that is that when I went to make my first payment, the bank had already gone bankrupt.
Life was starting to look really good for me.
Looking back on this deal, I basically screwed up on how I wrote it up.
I put into the contract that I would pay my part of the closing costs, such as title insurance and split half the closing costs.
This, my friend, is stupid because--didn't I just buy the home and pay for all my closing costs when I bought the home? Why would you pay the same costs twice?
I learned from this mistake, and now I have the buyer pay all of the closing costs. After all, it is their home if they exercise their option.
The faster they buy the home, the better deal they get with the title company because everything can be prorated and they will give them a better deal because of the quick turn around.
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