from Jack Miller's Creative Financing Solutions book
Too often, we find super deals, but they exist primarily because there's no financing to bail out a distressed owner. Hence, we too are unable to capture these opportunities.
Peg had found a small lender with 7 foreclosed houses which had been trashed. One of them was almost completely destroyed and the manager feared for his job once this became known. He agreed to sell them all to her at a mere fraction of his original loan value but only for cash; but Peg had to make up several years` back property taxes, and find the money to pay for necessary repairs.
Peg went looking for private loan money, but because of the condition of the properties, she couldn't present them in a way to attract- cash investors. She tried a new tack. She offered them as GUARANTEED NET LEASED RENTAL PROPERTIES with MANAGEMENT IN PLACE FOR 5 YEARS with a right to buy them for $30,000 each. With rehab costs included, here's the math:
COST TO SYNDICATE: $20,000 x7 = $140,000 TOTAL CASH NET
PEG'S COST TO BUY: $15,000 x7 = $105,000 TOTAL CASH NET
COST OF REPAIRS: $5,000 x 7 = $35,000 (WITH BAD HOUSE)
LEASE BACK COST: $2000x7x5 = $70,000 TOTAL NET RENT
GROSS RENTS/YR $3,500x7x5 = $122,500 BEFORE LEASE
NET RENT TO PEG $1,500x7x5 = $52,500 CASH FLOW
OPTION PROFIT $20,000×7 $140,000 ($50K SALE PRICE)
