If principal and interest payments would have totaled about $1995 per month, and taxes and insurance another $500, his rents would have needed to be in the range of $3000 per month in order to cover the normal operating expenses of a self-managed new property.  But would they have been? Not in most areas of the country.  For a house in the $315,000 range, rents might average around $1400 per month year around.  That means that the speculator would be faced with about $19,200 per house per year in out of pocket costs.  Twenty houses would have brought this to $384,000.

Continue reading “Cashflow Comparisons With Options”

Leases and Options resemble interest-only Notes and mortgages with balloon payments when you come to think of it.  A properly drafted Lease incorporates a promise to pay with security for the promise in the form of some sort of collateral in the same way that a Note and mortgage do.  The Option requires a lump sum payoff - or another promise of payment - just like a balloon note.  Oddly enough, when people see a Lease and an Option, they don't perceive the possibilities for wrapping either - or both - of them.  Read on.

Continue reading “Using Wrap Around Options”

"Buy-Back” Options are used in many areas of business.  Banks and Money Market Mutual Funds routinely increase their yields by selling government securities with the right to buy them back at a price that will generate a yield that will attract buyers. 

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Distress and foreclosure opportunities have attracted so many buyers that there seems little opportunity for the average person to complete a purchase.  But when one approaches distress in creative ways, much of the competition just doesn't appear.  Here are some examples:

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Failure to reach agreement as to value can break a deal wide open, so it pays to find ways to get around this obstacle. This pretty well sums up the way that negotiation techniques earn their keep when buying and selling.

Continue reading “Using Discount Buy-Back Concepts”

What one can do with houses, one can sometimes also do with privately held seller financing. Suppose in the foregoing example in the last Blog that the transaction had all been done with seller financing. Now the seller has a promissory Note secured by his former property that is paying 10% interest only, or $25,000 per year, for ten years. He’ll or his assigns receive $250,000 at that time.

Continue reading “Discount Buy-Back Concepts Continued”