Archive for Down Payment

The Five Profit Centers on the Strait Path

Jun 17 | by | Cash Flow, Discount Equity, Down Payment, Interest Rates, lease option
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MONEY%20TREE The Five Profit Centers on the Strait Path

The interesting thing about Strait Path real estate is that even though profitability is one of six factors considered for every deal, the Strait Path system is still far more profitable than other forms of investing. In other words, the Strait Path system is still the best even when profitability is an investor’s sole or primary focus.

This is because the system offers five profit centers, wher

eas others offer only one or two. The five profit centers include 1) discount equity, 2) cash flow, 3) down payment, 4) appreciation, and 5) tax benefits.

1. Discount Equity Discount equity is the difference between the market value and the purchase price of a home. Our finding system helps us secure properties with 15 percent equity or more. Depending upon the size of the home and its discount purchase price, you may make more on one purchase than you make all year in your current job. For example, if a home is worth $275,000 and you can purchase it at a 15 percent discount for $233,750, you’ll make $41,250 on the purchase alone.

2. Cash Flow Cash flow is the monthly amount you receive from your tenants less your monthly mortgage payment. In short, it’s the difference between your mortgage payment and what your tenant pays you each month.

$200/mo cash flow

3. Down Payment The technical term for this is “option consideration,” which is a fee paid by tenants to secure their opportunity to purchase the home within a specified period of time. This is nonrefundable, and we receive on average $5,000 down per house.

$5,000 down payment

4. Appreciation Appreciation is the rise in value of a property over time due to increased demand. What’s notable about Strait Path real estate is that we don’t rely on appreciation to turn a profit, though we do account for it when it occurs.

10% additional profit

5. Tax Benefits Tax law allows homeowners to deduct mortgage interest from their taxes. This is a huge advantage in Strait Path real estate, since the goal is to purchase as many homes as possible

With a fixer-upper, investors receive the first profit center and, if they’re lucky, the fourth. But they have no cash flow, they do not get a down payment, and capital gains taxes often wipe out any earnings. With rentals, investors enjoy tax benefits and sometimes benefit from property appreciation. They receive no down payment, however, and they’re lucky if they get a good deal up front and receive a positive cash flow. Once again, the Strait Path system offers investors all five income streams.

Taking advantage of alternative financing

May 21 | by | Discount Equity, Down Payment, lease option, Some food for thought
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If you don’t have the money to invest directly in real estate at this time, you can still make a ton of money by taking advantage of some programs out there that are not being widely publicized.

Let me give you one example:

My brother just bought a large house from Fannie Mae. It’s on a corner lot in a good area, and includes a studio that can be rented separately. At the peak of the market, it sold for $335,000. The county currently has it appraised at $181,000. My brother bought it for $80,000 cash. It’s an amazing deal. The rental value is $1,750 a month, or $21,000 a year. It will produce about $5,000 in free cash flow a year.

As I said, my brother bought this property for cash — but it could have been done with just 10% down through Fannie Mae’s HomePath program. That means an $8,000 down payment would have gotten you in. If you then sold the property for just half its former peak value in a few years, you’d be selling it for $167,500. That would be a capital gain of $87,500. More than a 1,000% return!

And that ignores the $5K a year in free cash flow or the few thousand you’d pick up in amortization (the reduction of a loan balance over time) — money you could have applied to closing costs and initial repairs.

REIC Member Success Story: Rodney Beacham

Dec 2 | by | Cash Flow, Discount Equity, Down Payment, REIC Testimonials
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I grew up with Kris Krohn, and we attended BYU together.

I knew he was getting started in real estate yet, but I was cautious about anything “un-salaried” because my dad had been self-employed most of his life and had not had a steady income.

So after graduation, I started a full-time IT audit job in Seattle in April 2005. After one year I knew that would not produce financial independence nor would it satisfy all of my passions.

I contacted Kris and he said I needed to be in Utah in order for him to help me, so I avidly started looking for the right job, and finally I found something that fit and moved to Salt Lake in February 2007.

On the first day of training at my new job, Kris and his team had already found me the perfect home just 10 minutes from my work. It was in perfect condition, 5 bedrooms and 2 bathrooms (so easy to rent out to roommates), in a perfect neighborhood, etc.

It also had $40,000 of equity, but I didn’t know what that meant at the time.

I just knew the seller was desperate and was very grateful I was able to help them get out of the mortgage. An elderly couple, they had bought the home over 20 years earlier and had raised their children there. Unfortunately, the wife had fallen down the stairs due to her age so it wasn’t safe for them to have a multi-story house anymore.

So they had ordered a single-story manufactured home to be on leased land in a retirement community, and didn’t think to list their old home for sale until just one month before they were ready to move.

So their Realtor advised them to list their house really low so that it would sell quickly.

They listed it on Friday, February 16, and I put an offer on it on Tuesday, February 20 (Monday was President’s Day); by Wednesday we were under contract.

So I had it locked in for a good deal, before better offers could come in (which would take longer to close anyway since the seller was desperate).

The seller was very grateful I was able to lock in and close quickly, and even brought their grandkids over to trick-or-treat – we had a good relationship forever afterward.

At this point I didn’t know enough to really understand all the numbers or the REIC system. I just knew the seller was really happy because I was helping them, and Kris’ team told me I was getting a good deal.

Being single, I rented out the extra rooms in my house for at or below rent market rates, and was able to cash flow well above the mortgage payment, even while still living there myself.

I couldn’t believe I could actually be PAID to live in a house!

Later I bought a second home and repeated the process. The old roommates took good care of my house so I let them stay there (they’re still there now), and I got new roommates for my new house.

Again I cash flowed well above the mortgage. Between both homes I enjoy a passive cash flow of $700!

At this point I was ecstatic. I didn’t know everything about REIC, but I knew it was going really well for me.

I also knew the appraisals on both my homes were $20,000 – $30,000 above what I paid at the time I bought them, so I must be getting a good deal.

I had friends buying fixer-upper homes for $5,000 below appraisal thinking those were good deals, and so by comparison I knew I was getting an amazing deal.

That enthusiasm attracted partners – others inquired about my success and some requested to be my partners – so now I have three investment partners after just owning 2 homes.

That enthusiasm grew and grew, and I started introducing more and more people to REIC, and soon my job was getting in the way of my real estate passion, so I quit my job and started working with REIC full-time, and I’ve never been happier.

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