SUB2 - Why L/O And Not Retail
I understand John Locke likes to buy with little to no equity (b/c he L/O the house) but for a newbie like myself shouldn't we try for a something with some equity in it and cash out right away at FMV?
Thanks,
Matthew Marks
The key here is whether you require cash flow or not.
"Strategies" are meant to achieve a goal.
You have to decide on your goal first.
Cash-flow or long term appreciation.
Maybe some hybrid of the two?
mmarks,
Glad to meet you.
First anyone that thinks that I just buy or my students just buy little equity or no equity houses two recent deals from my students comes to mind one with $81K and the other with $85K equity, so these are not litlle or no equity deals.
Almost every house I have looked at has equity, the sellers put money down on the house or there has been some appreaciation.
The way well buy and sell creates equity for us, the seller by selling conventionally will have all their equity eating up with offers and fees, we just point this out to them.
We do not L/O in the majority of cases, I have never used the L/O menthod of selling. It seems these L/O people get in on short money and do not take care fo the property or re-finance, like a person who came with a serious down payment.
Let's look at a typical deal done on the buying and selling side.
Purchase price: $200K
FMV $210K
Gave seller U-Haul money $1K
This I think would be in most peoples mind a little or no equity deal.
We now sell this house: I shoot for a min. $25K profit on all deals.
Selling price $228K
Down payment: $12K
Monthy pack payment by increasing the interest rate a few points giving us a monthy passive income.
$200 per month $4800 for two years.
Due when my buyer gets a new loan in two years.
$!5K
So we are looking at a net profit of rounded off $31K.
Sam who just posted one of his deals got $20K down on his first deal, the main reason for this is he did not know he couldn't because I told him he could. I shouldn't have to explain this.
The down payment builds the equity when we sell, should you have to take the house back and you have placed 2 months worth of the down payment money in a trust account at the Loan Servicing Company the this is your contingency money let it build up. You also have the house to sell again and do it all over.
The main reason that people recommend L/O is because you can find renters all over the place, and then you may have to find high equity deals.
If you are waiting around to find 80% of FMV deals to keep you in Subject To deals, then you really ought to think about that one.
John $Cash$ Locke
Thanks for all the great input.
What I was trying to say was that it may be prudent to start with baby steps (sell at FMV IF enough equity is present) and later progess into selling the property L/O. So John L. how long does it take for your manual to ship???
Thanks,
Matthew
mmarks,
I ship USPS priority mail probably where you are you will have it in one day.
The manual is only part of it, cell # phone I answer, 24/7 e-mail one on one and two web sites to network with investors and bird dogs.
John $Cash$ Locke