How Important is Private Money?

How Important is Private Money?

One of my students recently got a house under contract in Houston, Texas.

His strike price was $21, 000.

With $10, 000 in repairs he could owner Finance the home for $84, 500  (Based on the local rents). 

He didn’t have the money to buy the house himself. He didn’t have any private money lenders.

Did my student resign himself to the idea of wholesaling the property
for $31, 000 and making a nice $10, 000 profit and move on? Nope…

Instead, I advised him about how to go find a private lender…and he did!

He found someone to lend him $31K at 8% costing him $206/mo.

Since he now owned the house he could offer it for sale with “Owner Financing.”

$65K w/ $2k Dn …BUYER FIXES IT!
$63K @ 11% for 22 yr = $635/mo

$635/mo – $206/mo = $429/mo net

He pocketed $10K when he borrowed the $31, 000 from his Private Lender.
(Tax Deferred/Borrowed Money) and $2k from the down payment.

BOTTOM LINE:
Rudy got paid $12k to create a $429/mo positive cash flow for 22 years w/o being a Landlord!

22 years = 264 months
264 x $429 = $113, 256
$113, 256 + $12, 000 = $125, 256

All accomplished w/$0 of Rudy’s own money!

If Rudy does that once a month and in 5 years he’d have 60 notes bringing in $429 each.

60 x $429 = $ 25, 740/month …………………$308, 880/year

And he would have collected $600, 000 in up front money and $120, 000 in down payments;
= $720, 000

I’m sorry ….HOW MUCH DID RUDY HAVE INVESTED?

Oh that’s right…. ZERO $ !!!!

So, “How Important Was Private Money to Rudy?”

Well they very same deal he was going to wholesale for $10, 000 ended
up making him him $12, 000 up front and $113, 000 + over the next 22 years.

I’d say the private money made quite a bit of difference, wouldn’t you?

Many people I know do way more than 1 per month.

Just to quell your limiting thoughts, one year
I bought 150 houses….and there are people who do more!

Here’s the plan:

#1) Find a method that works
#2) Become an expert
#3) Stay focused
#4) Keep refining your systems
#5) Make sure you buy plenty of assets with the money you make.
(I bought boat & Mini Storages)
#6) Rinse and Repeat until it no longer works
#7) Make Adjustments
#8) Repeat 1 through 7

And here’s one last question;
How much was his coach worth?

I’m just sayin’ …

–Mitch Stephen–
www.1000Houses.com