I’m earning 24% by investing in turnkey foreclosures. And NO landlord hassles.
While taking a course on syndications in Puerto Rico, I learned about a way to purchase bank foreclosure houses that come with a support service package (SSP) that made my investment hassle free.
I met a guy who purchases the foreclosure homes in bulk from banks. Some he keeps for himself, the rest he sells through a small group of people who work with him. The homes are primarily in the Midwest. He offers them with a SSP included in the price whereby the homes are resold to an owner occupant with easy terms. Each home is guaranteed to be lien free and in livable condition. So I got the list of houses. I picked a house in Detroit MI.
I bought the house for $17,500 on January 5th, 2010. In less than 90 days the house was resold to an owner occupant buyer with easy terms in as-is where-is condition (all handled by the support service package). The buyer is a 51 yr old woman who bought the house for $600 down and $350 per month. I got all her information, closing documents, pictures of my property, deposit check for $600 and a 15 yr note at 9.9% paying me a cash flow of $350 per month. She as the owner occupant is responsible for taxes and insurance. I’m just the bank. The payment (PITI) is collected by a national note servicing company. And starting March 1st, 2010, they will be sending the principle and interest portion ($350) to me every month.
My annual return:
$350 PI x 12 months = $4200 cash flow
$4200 cash flow + $600 down payment = $4800 income the first year
$4800 / $17500 investment = 27% return on investment.
$4200 / $17,500 investment = 24% return for years (2-15)
If I hold the note for the term, I will have collected over $63,000 on a $17,500 investment. The best thing is no landlord worries. I plan to buy my next one in a couple of months. Stay tuned.
Huh?
So sub-prime lending is the answer??
You buy a house for $17,500. Sell it for $32,750 on a 15 yr. term of 9.9%. Your short term capital gain of $15,250 is taxed at (let''s say) 28%. So you owe the IRS $4,270... and decide to pay the IRS on your HUD-1 when you sell. Might as well pay on the HUD-1 because you are a real estate dealer and you cannot claim an installment sale and defer taxes for later years.
So on day one for your $17,500 you have the buyer''s $600, a note for $32,750, and an IRS liability of $4,270.
And on day one, your ''owner'' is out $600 and has a $17,500 house with a $32,750 mortgage.
Things go great for a year. You get $828 in principal and $3,372 in taxable interest. Then the ''owner'' decides to sell. Ooops. No buyers for the as-is where-is condition house with a $31,922 mortgage. So the ''owner'' stops paying and hangs out until you decide it is time to start foreclosure.
At the end of 12 + X months, the ''owner'' is out $4,800, which is less than what he would be out if renting. In Michigan, it looks like the foreclosure process may be about 3-4 months from default to final eviction.
Now you have a $17,500 as-is where-is condition house in Detroit Michigan. You collected enough to pay off the IRS and the trustee. Hopefully the ''owner'' paid the taxes. Hopefully you can sell it again for $32,750 on a 15 yr. term of 9.9%.
Ain''t sub-prime great? But, hey, NO landlord hassles.
I''d be interested in learning more about this. I don''t know what needs to happen here, do you do some sort of private message, or do you simply provide the information in a reply?