LESS MONEY - MORE PROFIT

[mmartin 0]

Hi everyone,

 

Please help me! I think I have a strategy that will produce more profit with less out of pocket!

 

 

What we do is buy low and sell hi! Either we sell right away or we lease option and then sell hi!

 

Why not buy a house for below market value, (i.e. huds, va's, foreclosures, motivated sellers.) when you get the loan get a interest only loan. here is the catch. with a interest only loan you never pay toward the principal! but why would we do that when we buy low and sell hi! with a interest only loan you only pay the amount of interest each year. so on a 100,000 dollar house at 5% your yearly interest is 5,000 making you monthly payment 416. let me give you a couple of options to see the difference:

 

interest only conventional loan

house - 40,000 house - 40,000

mrkt value - 60,000 mrkt value - 60,000

yearly interest - 2000

mos/pay - 166.66 amotrized schedule - 240/mos

i rent for - 360/mos i rent for - 360/mos

after 2 yrs of payments - 40000 loan after 2 yrs of payments - 38,987 loan

I sell the house - 60,000 I sell the house - 60,000

360/mos - 166/mos = 194/mos profit 360-240= 120/mos profit

194/mos X 24 mos. = 4,656 120/mos X 24 mos. = 2880

60,000-40,000 = 20,000 60,000-38987 = 21013

total profit = 24,656 total profit = 23,895

 

The interest only plan gives you 761 more dollars and you spend (240-166 X 24 mos.) 1,920 dollars less! Now this a very simplistic plan I have used as an example. Try the plan yourself with houses that cost more and you will notice a huge difference.

 

My point is when we buy low and sell hi, why do we pay more to the principal when we don't have to! Lets keep the out out of pocket expenses lower. I have got to believe that there are other things (investments) that we can use that extra money for!

 

I hope this makes sense if anyone has any questions please email me at:

 

mmartin29@neo.rr.com

 

thanks,

 

Michael Martin

[mmartin 0]

Hi everyone,

 

For some reason when I posted the interest only loan plan the two loans were separated when I wrote them, however when I posted them they went side by side! this might be somewhat confusing and I apologize. it should read from left to right: interest only loan and then spaced over to the right it should be conventional loan. they entire example should be in those two examples.

 

Even though it looks weird and may be hard to understand please read it! I really believe that this could be a way for us to make more and spend less!!

 

If you have any questions please email me at:

mmartin29@neo.rr.com

 

thanks again,

 

Michael Martin

[-Tony- 0]

mmartin,

 

what about closing cost and most interest only NOO you put 5% down. I no this is what I was doing. But try this buy low like you said and use a heloc (bank of america has this) at 7% interest they will loan 80% of the APPRAISED value. 60k x 80% = 48k pull an extra 8k out or leave it in place. The best part is closing cost for a heloc is $350.00. personally leave some of that equity there refinance into a conventional loan (wether it be amotrizing or interest only) and you can roll in the closing cost. or take the 8k out and pay the cc and 5% down. This is not truly no money down but money back

[mmartin 0]

Tony,

 

The closing cost for interest only loans is dependent of the mortgage broker you use. they make the closing cost what they need to to get most deals! My best friend is a mortgage broker and he charges me no closing costs. also the helo has a low closing cost but again that is dependent on the mortgage broker.

 

my buddy is excellent with creating creative financing! I am going to ask him permission if he will allow me to put his name and number on this forum.

 

with all that in mind the interest only loan is still the best option. I don't know if I want to use up my home equity or if I have enough to use! Do you due dilligence and find the absolute lowest closing cost. negotioat with brokers, they work on commission they will lower the closing cost for a deal!

 

Take care,

 

Michael Martin

[lacashman 0]

negotioat with brokers, they work on commission they will lower the closing cost for a deal!

They charge a higher rate and get a rebate (YSP) from the lender. This is how they do with no closing cost. Not that that is wrong. On a two year loan it will work out to just about the same cost but you don't have to come out of pocket. Even when you go direct to the lender they will do the same thing. Ever hear of the "no cost" refi?

 

Example from Indy Mac's web site

 

Rate Points

5.875 1.875 (you pay this)

6.25 0 (par rate)

6.5 -.875 (rebate)

 

On some loans the rebate for a loan with a 1/4% higher rate can be over 1%.

 

You missed Tonys point on the equity line. You get the equity line on the rental property.