Being your own bank

I talked to a great friend of mine this week and he informed of another way to sell real estate, on a land contract.

As you probably know that banks just aren't lending. IN fact new Wells Fargo ad shows a family on a trip that can access there checking account to make sure they still have money I guess. What's missing is they don't even mention getting you a loan, because that's not want they want. They just want your deposits to loan to federal agencies that pays them a great return. That's how we finance this deficit, with taxes and banks.

So the land contract can be a great way for you to become the bank. With homes being $15k you can afford to do this. It's really a great time for you to create wealth!

Here is how it works, say you pay a total of $40,000 with rehab on a home. You advertise your home for sale and you will carry the note. Get a down payment from the new client, at least a down payment of $1500-$2000. Make sure that can also qualify for a mortgage in the future.

The payment should mirror the rents in the area or even a little more. For example say $900 is the rent then that should be your payment. So add up your taxes (monthly) and your insurance (monthly). Then after you add the total cost of those items then add the rest to make it up to at least the rent in the area. In this example it is $900.

Make the amortization table reflect the payment not including the taxes and insurance. This allows the buyer to take a tax deduction on the interest. Don't worry about the interest rate just make sure you have the right payment.

The price of the home should reflect the top of the market on that home. This example it would be $85,000-$90,000. So your selling price should reflect that minus the down payment.

After you have all that done then wait 3-4 months and sell your note. In this example you have $40,000 in the home. Advertise you'll pay 10% on the note for the life of the contract. The investor (note buyer)will get a first lien position at a 50% LTV (loan to Value). I don't think the banks are paying that great of an interest rate.

You'll still make a great profit on the monthly payment and you'll have a $45,000-$50,000 spread. You can now go out and buy more homes with your money, and increase your wealth every deal.

That example can be done a million different ways. Just make sure you get all the money you have in the home and make some profit on the back end of the deal. This will bring you a great income today and in the future.

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Brett young
Valley Realty
Owner/ CEO Roof Top Investment
Real Estate Investment