Original message
| Vlad
  |  "margins of profit"
, Tue 26 Sep 19:24 
hello
what is the mimimum discount of fair-market-value you need in order to profit on a installment land contract?
Vlad
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Replies:
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| Jackie
| "Re(1):margins of profit" , Tue 26 Sep 19:47
zero
you can buy AT fair market value and still make a good profit
IF the interest rate is a low one.
Jackie
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| | PaulieShark
| "Re(2):margins of profit" , Wed 27 Sep 07:37
Jackie,
You seem to be making the "age ol' point" that there are two variable in a purchase... The price or the terms! Am I understand you're answer correctly?
If I may be so bold as I identify what I think you're saying...
Say you have a 100K FMV home.
Say the owner has has NO equity.
Say PI at 7-percent 30-year is 665.30. So so PITI in totla is 750.
Now say you can assume this relatively low interest fixed mortage. AND you can rent this place for $1055/mth (Note all these numbers are purely fiction to illustrate)...
Yearly income would be $12,660. Then even with 20-percent vaceny and 10-percent repares (there wouldn't be any of this if you set up your "tenant" in lease option)... that's $9,115.2...you yearly cost to cary is 9000. Profit range from $3,660 to 115.20 not counting any option considerations you collect.
Finally, you could also do a wrap. Same 100K home @ 7 percent. No equity. You assume the loan. You resell on land contract. 10-down ($10,000 into your pocket front end). You now have no vacancy issue, no repares issues. Etc. And... 30-year ammort, at 12-percent interest, on $90,000 is $925.75. So no headaches and every month you make the spread between the mortgages ($925.75-665.30=$260.45)
By My Hand,
Paulie
The only thing worse than being talked about...is not being talked about... Oscar Wilde
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| | Jackie
| "Re(3):margins of profit" , Wed 27 Sep 21:12
I would NOT be renting the property - it would be sold with either a lease option or a contract for deed. In that case you should be able to count on ZERO vacancy rate -- but even if you had to cover the mortgage for a month or two -- the option consideration and or down payment would MORE than make up for it.
Even if the fair market value of the property were $100,000 -- with owner financing you can sell for about 10% more -- or $110,000
so, you would have a spread in the price and the interest rate.
To illustrate my point, I recently bought a house subject to the mortgage. The seller had only been in the house 6 months. Needless to say, there was NO equity. I bought it for $106,000 with PITI at $980 -- I sold it a week later for $120,000 with $10,000 down on a contract for deed (no balloon) and monthly payments to me of $1189.89. The only repairs were picking up a dead spider and 2 dead crickets.
So, this house with NO EQUITY created $10,000 up front profit, $200 a month cashflow ($2400 a year) and a backend of $4,000.
I'll take those NO EQUITY houses all day long - thank you!
Jackie
Jackie
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| | Jackie
| "Re(5):margins of profit" , Thu 28 Sep 09:43
Lynn,
I normally sell with a Lease Option -- unless they give me close to 10% down, then they get a contract for deed -- or if getting tax benefits is an issue for the buyer.
Jackie
Jackie
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| | Vlad
| "thank you" , Wed 27 Sep 21:21
thank you Jackie. your example was exactly what i was looking for. so i must charge a higher selling price and higher interest to create cashflow and a front end and back end.
Vlad
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