Monday, May 30, 2005

A Great Investment Strategy

Dear Readers,
Want some ideas of how to make money investing in real estate, without taking significant risk? Here's an example of an actual lease purchase I negotiated for a buyer a few years ago. This strategy can be used for Wenatchee real estate or in any market in the country. It's just a matter of finding where the opportunities are.

Home listed for sale at: $79,900

Negotiated a 2 year lease/purchase as follows:
* $2,000 cash deposit to sellers
* $495 per month (pays sellers mortgage, taxes, insurance)
* Seller retains ownership
* Buyer maintains control of the property, with right to sub-lease

Buyer (lessee) re-sold the property (within two weeks) on 1 year lease/purchase for: $84,900
* New buyer paid $3,000 non-refundable deposit. Do you see an immediate $1,000 profit?
* New buyer pays $750 per month for one year. Do you see $255 profit each month?
* New buyer is given $200 per month rent credit (only if they exercise the lease purchase). This rent credit helps the new buyer build their down payment, but cuts into the profit. Remember, though, you've got a $5,000 mark-up and making the $255 per month in the
* Buyer was not able to get financing at the end of the lease period and I re-sold it again with a $4,000 deposit. The other terms were essentially the same. This buyer was not able to get financing at the end of the lease period either, so the buyer turned the property back to the seller (at the end of the 2 year period). In the meantime, the original buyer collected $7,000 in deposits (Paid $2,000 upfront) and collected a profit of $255 per month for 24 months ($6,120). $13,120 return on a $2,000 upfront investment. Not bad. And, the original seller has their property back, which is now worth more due to property value increases.

Do you get the jist? In a hot market like we are currently experiencing, good opportunities may be rare, but they're out there. I can also see some opportunities with buying into pre-foreclosure properties.

Some food for thought.


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