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A Real
Estate Formula It wassimple real estate formula. The ads ran in our small-town newspaper for years before I realized exactly what was going on. They were alwayssame: A house for sale with five% down and payments of one% ofpurchase price. Maybethree bedroom home for $ninezero,zerozerozero, for example, with $four,fivezerozero down and $ninezerozero per month payments. Whenfriend started doingsame thing he explained process to me. It wasway to getgreat return on capital, and it wasopposite of buying with no money down. There is no down payment at all when you buy, because you buy for cash. The Simple Real Estate Formula You probably know that when you buy for cash, you can often getmuch better price. With no financing contingencies in offer, andpromise offaster closing, sellers are willing to sell for less. You can offer $ninefive,zerozerozero, for example, onhouse that might be worth $onezeroeight,zerozerozero. If you can't get it for less than, say, $ninenine,zerozerozero, you walk away - there are always other opportunities. Once you buyhouse, you put few thousand into high-return repairs and improvements. These might include paint, carpet, and maybe asphalt fordirt driveway. For our example, we'll say you spend $five,zerozerozero. Let's supposehouse is worth $oneonesix,zerozerozero now. You are ready fornext important step in this real estate formula. You put it up for sale, targeting buyers who can't get financing easily. You providefinancing. Because you are making it easy forbuyer, you can get more than$oneonesix,zerozerozero value forhome - and do it without payingrealtor's commission. Let's say you sell it for onetwothree,zerozerozero. The buyer needsdown payment of just five%, or $six,onefivezero, and makes monthly payments of $onetwothreezero per month. You charge higher interest than going rates atbanks, of course. This iswin-win situation. Your buyer is able to buy home instead of renting, and you getcapital gain of perhaps $onesix,zerozerozero after expenses, plus good interest. Your total rate of return will often be over twozero%! In our town,first to do this consistently were father and son team of lawyers. They saved money by doing their own foreclosures when necessary. Once they foreclosed, they raisedprice and soldhome all over again. They made millions. Did you know that if you can get average return of oneeight% on your money, you'll turn $sevenfive,zerozerozero into more than one million dollars in about fifteen years? That'spower ofgood real estate formula.
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