If you are looking for ways to make money through real estate investments, you are in luck. Today, we’re sharing information about a recent remote deal we know about that netted a profit of over $60,000. You read that right. The savvy investors made a fortune on a property they never saw. Learning from the experience of such experts can yield valuable information. It is in this spirit we are sharing their story with you. Following their example may help you replicate their successes in your life.
How they found the deal
Information about the property came their way from a trusted friend that worked in real estate. After he passed on the juicy little tidbit, our savvy subjects enlisted the help of their friends in the area. Their friends took a comprehensive look at the property, created a report, and mailed it back to them. They also put up For Sale signs and handled other minor marketing tasks. With these responsibilities out of the way, our investors were free to take care of more important things. They ran ads in the local newspapers and contacted builders and appraisers to ensure the property was in decent condition. They did everything over the phone and were always in the loop.
Their total costs for this endeavor came out to a little less than $285K. The property already had financing and their monthly costs were about $1.8K with a 3-year term. Once this part was over, everything was smooth sailing. All they needed to do was find a buyer. They used a simple and quick system and, before long, they’d accomplished their goal. They sold the property for $329K with a 2-year lease. This is a teachable moment. It’s important to make sure the buyer’s terms play out earlier than yours. This is just a failsafe in case you need more time.
3 Revenue Streams for one property
To maximize the revenue potential of their investments, our subjects get paid in three ways: immediate cash, monthly cash, and a big payout on the back-end. This property was no different. Their first payday came in the form of a nonrefundable payment of $24K from the tenant/buyer. He agreed to pay the sellers in $2.5K installments throughout the term of the lease. They received approximately $11K of this money at the time of the sale. Their second payday comes from the spread between what they are paying the bank for the loan on the property and the amount they collect every month from their tenant. This comes out to $500 a month for two years or $12K over the course of 24 months.
Their third payday includes the back end profit mentioned earlier. Remember, they used a lease purchase to buy this property. In other words, they are responsible for everything, including the mortgage. This also means they have principal pay down and this amounts to a little over $400 a month. Over the course of 2 years, the principal pay down guarantees a total payout of at least $9.6K. The math becomes a little more complicated when it’s time to calculate the back end revenue of the premium they set. To do so, you must take the sale price ($329K) and subtract their purchase price ($285K) from it. Remember to subtract the $24K from payday 1 as well. The remaining premium is roughly $20K.
Getting to the money
When we combine all three paydays, the total profit from a 24-month lease comes out to almost $60K. If they extend the lease to three years, this number will be even higher. It’s also important to note that they had to pay the agent a 25% referral fee from Payday 1. This comes out to roughly $6K but, it’s worth it. Building a strong relationship with another professional in the industry can lead to several deals over the course of its lifetime. It’s definitely worth it to ensure that one hand washes the other. Their boots on the ground were much less expensive. They paid $400 for their services. Not bad for everything they accomplished. The buyer paid the property tax and both he and the seller split the closing costs. In this way, our savvy investors didn’t have to pay a dime out of their pocket for this fee.
The Bottom Line
For some, buying property sight unseen is a risky endeavor. But, if you have the right network, most of the risk goes out the window. Our investors’ whopping $60K payout is proof of that. Not bad for a house they never visited.
Written by Garrett Parker
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