It’s no secret that big banks make money hand over fist. One of their most lucrative revenue streams is the mortgage market. If you’re looking to sell a property, why not become the bank? You can and you should!
Let’s run through a scenario.
You have a house you want to sell. You think the house is worth $100k. You contact an investor who says he can only pay $90k because the house needs repairs and he needs to make a profit. The investor offers you an owner financing deal of $10k down with an interest-only loan of 5% interest over 5 years with a balloon payment at the end. Huh?
This may sound complicated but in reality, you have a chance to become the bank & make serious returns. Here’s what this means for you.
$90k purchase price
$10k down (cash in your pocket at closing).
So you are holding a note for $80k ($90k-$10k down).
5% interest-only means 5% of $80k per year = $4,000 per year in interest you are collecting.
So, over 5 years, you’ll collect $20,000 in interest payments and guess what? The investor now pays you the full amount due on the note ($80k).
Your total return:
$10k down payment received
$20k interest payments received
$80k loan payoff received
As you can see, by becoming the bank, even for a short period of time like 5 years, you can earn significantly more than just selling your house for cash today.