Case Studies
The following are case studies of real deals in which the investors created a win, win, win situation for all involved. All of these transactions are factual, and are recorded in the states in which they took place. Real names have been changed or ommited to protect the privacy of the parties involved.
Case Study # 1:
The seller just wants the money he has in the home.
A young man had purchased a home for $75,000 with a down payment of $10,000. His 8% interest rate gave him monthly principle and interest (PI) payments of $603.00, the taxes and insurance added another $60.00 (taxes and insurance are called TI, put the two together you have PITI) Very quickly he realized that he no longer wanted the home and needed a quick way to get his money back out, but chances were that by selling so soon after buying, he'd be forfeiting his down payment money.
The cost of selling a home can very quickly eat up 13 to 15% of the asking price, and a real estate agent had advised him that the listing price now would not be much different than his original purchase price.
When he called an investor, he explained that his real goal was just to recover his $10,000 and get himself out of making the monthly payments. Rather than just give him the cash, the investor started asking him questions about his other financial arangements.
The investor asked; Did he have other debts?
The seller answered; Yes, as it turned out he had accumulated a substantial amount of credit card debt and was having difficulty making ends meet. (Probably why he didn't want the house any longer)
The investor asked; What was the service on that debt?
The seller answered; He was making monthly payments of $250.00 a month on the credit card.
What the investor proposed was instead of purchaseing the property outright and paying a lump sum, he would take a lease option on the property, paying the credit card payments and take over the mortgage payments on the home for the seller. He would continue the credit card payments and mortgage payments untill such time as he excersizedhis option to buy. At which time he would give the seller the ballance of the $10,000 and pay off the mortgage.
To pull this off the investor explained, the seller would still have to make the next two monthly mortgage payments and credit card payments, but by then the seller would be of the hook and the investor would start paying the mortgage payments and credit card payments.
In the meantime the investor advertised for, and set up a tennant/buyer with a lease with an option to buy. The option sell price was for $82,000; an option consideration (like a down payment) of $4,000; and monthly lease payments of $850.00.
Ballance due on the original loan: $65,000 owed to seller,
total of $10,000 less the monthly credit card payments.
So the seller made two monthly mortgage payments and two monthly credit card payments totaling $1,826. while the investor found tenants for the home within 6 weeks.
The investor got the $4,000 from the tennant and a net cash flow of $187.00 a month lease payments (after deduting the mortgage and credit card payments). His backend take (the total he recieved at the end of the lease, and the excersize of the option) was $7,000 after paying the original mortgage and giving the seller the rest of his cash.
Not bad by anyones standards, and a classic example of a win, win, win situation. For you see there were three winners in this situation the seller, the investor, the lease/option buyer. Which is our objective to always make every one involved a winner without anybody being ripped off.
Since these examples are so long, the rest of them are on seperate pages following this one.