How does real estate make money?

[Akkiemaj Frederick]

I am a little confused. I finally lined up a few properties where the owner agrees with seller financing but I'm not sure of the terms that I should agree to. Why would I agree to pay more than the sellers are asking... Same with the bank why would I finance a property thus ending up paying more than its value due to interest?

The property is at 40k, the sellers agreed to 4% down with 6% interest. But how long should I agree to the terms. I definitely don't want to have negative cash flow and want to turn some profit even if it's $100 a month but that would bring me-too about 7 year finance unless I do a balloon payment after a few. Still the process is better than a 30-year FHA but how do we make money if we are paying so much for a property that's not value this much?

[Andrew B.]

your post is very confusing. Either a property is a good investment, or it is not. If you cannot cashflow from the purchase, and your investing strategy requires cashflow, then it is not a good idea to buy the property.

Why would you pay interest? Because that is the cost incurred for purchasing the service of being loaned money. Not sure why you think anyone would provide anything to you at cost.

Are you saying the seller is raising the price on you due to seller financing? Again, he is providing a service. Instead of getting $40k and walking away, he now has to babysit you for several years and take the risk that you will default. This extra work requires he take extra profit.