How do you make money when the house is over-leveraged homes and where the mortgage payments are more than both the value and the market rent? If you do this business long enough, you will come across homes that are over-leveraged where the monthly mortgage payments are more than market rent.
We’re going to look at how to change the loan and how to use the property to maximize rents. Whether or not you were going to hold the property or flip it, there are ways to profit from an over-leveraged house.
Here’s my example
The House Mortgage Balance – 325,000, and the Payments – $1,950 PITI.
The Mortgage Breakdown looks like this:
P&I = 1,598.80; Taxes = 266.67; Insurance = 84.53
However, The true Market Value is only 275,000 and the Market Rent – $1,600
So how do we make money here?
If you just try to rent it, you’ll have to come out of pocket $350 every month to make payments.
Straight Rent: Market Rent $1600 – $1,950 = -350.00
If that’s the case you might as well throw that one back. But wait, what if we could….
Change the Loan:
Ask the bank to separate taxes and insurance pay principal & interest only. Separate the P&I from the T&I so instead of escrowing those payments, you can ask that they be released and no longer escrowed and then you pay the taxes and insurance separately.
Loan Modification:
Bank agrees to modify loan payments temporarily or permanently. Something would be better than nothing.
Create Terms to your buyer:
Your Lease Option transaction could look like this Lease price: $2,000 – $1,900 = 100.00 Plus an option deposit 3% Option Price: $345,000 (after 3 years) L/O price $1,900
I explain this in detail in YouTube video: https://youtu.be/CgvNnu2Cax0
Short Term Rental:
Create a short term rental company with Weekly Rent of Your rooms. It could look like this: $250 X 3bed = $750/wk = $3,250/month! Not bad income from one house. Per year that would be $39,000!
Short Term Vacation Rental:
Almost the same as above except you rent on a daily basis instead of weekly. AirBnB is a good example of how regular people book and rent their houses like a hotel. Let’s say you book the house @ 20 days out of the month @159/day
$159 x 20 = $3,180 /month. That’s $38,160 a year!
Short Sale & Flip:
Bank agrees to a short payoff of $265,000. You flip for $275,000-$280,000. $275,000 – 245,000 = $30,000 profit!
In the lease option scenario, the buyer pays more for the property and for the monthly rent because of the value to him. It’s about what the value means to the buyer. It’s worth more because of what the buyer is willing to pay, not really because of market rent. This is really what value means, it’s just what someone is willing to pay for something.
So it’s valuable because, the house is newer and in a great neighborhood, the buyer can just walk in without qualifying, with just a down payment and he is instantly in his own home. He gets to live in a home before making a permanent commitment because he has the option to buy, he does not have to perform at the end of the lease.
A good example is getting a car with bad credit, you know you need the car so you are willing to pay more now rather than do with out.
Get the Deed Subject To Underlying Mortgage. This course helps you to buy homes without getting a mortgage, just take over the existing mortgage payments.
Get the course here: www.mycashflowuniversity.com
