This property is a SFR 3 bed , 1 bath at 1,075 sq ft.
The Benefit: Most investors we talk to are looking for passive / hands off type of investments. They don’t want the hassles of finding the properties, the headaches of managing tenants or maintaining the property. We do all the heavy lifting for them, so they don’t need to worry about any of that. 1st we acquire the property then we place a buyer who has agreed to pay for the house over x number of years with monthly installment payments. This is called a Contract for Deed. In short it means if the buyer(s) preforms under the contract as agreed, then at the end of the term of the contract we transfer the Deed to the buyer.
Step One: The total capital requirement from you will be $50,000, this includes the purchase price of the property of $47,000, acquisition fee of $2,250, and closing costs of $750. We always try to keep the Loan to Value (LTV) about 70% of the Contract for Deed (CFD) value. Most of the time we will not do any repairs to the property and sell it “as is”.
Step Two: The cashflow analysis is easy with a Contract for Deed (CFD) compared to a rental, there is no need to account for management fees, taxes, insurance, or maintenance. The new buyer pays all those cost and is responsible for maintaining the property per the agreement. For this property it is $710 monthly, $8,520 annually.
Step Three: Private Lender returns… You will receive 8% on your capital ($333.33 monthly, $4,000 annually), paid out to you on a quarterly basis (four times a year) and at the end of each year we will pay you 2% points, $1,000. Our requirement is a commitment of at least 3 to 5 years, so we want to reward you with a little extra at the end of each year. A return of $5,000 on your initial capital commitment of $50,000 is of course a 10% return. Where else would you receive that type of return on a truly passive / hands off investment?
Long Term Lender ROI Analysis: Here’s how those numbers look over the course of a 5-year period… it’s straight forward. Loan interest of $20,000, loan points of $5,000 for a total return of $25,000 on a capital commitment of $50,000. That’s a ROI of 50% in 5 short years.
Are You Ready? So, what do you think? Is it time to start making better returns on your hard-earned money or even that lazy money that you have in your IRA or other retirement plans.
Next Steps: If you want to proceed, let us know. We will write up the agreement and send you all the documents we use to keep our Private Lender partners protected.
