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Updated almost 3 years ago,
Confused about private money interest rate example in BP book
I’m reading through “Investing with No/Low Money Down” and am struggling to understand private money interest rates, specifically the example on page 101.
Investor receives $130K, for a five-year term at 8%, interest only, which comes out to $866.66 per month. Several years later the investor sells the property for $190K, clearing a huge profit.
I believe I understand where the monthly payments come from, ((130,000*.08)/12), but I don’t understand how the investor clears a “huge profit.” Five years of monthly payments at $866.66 per month = ~$52K. Add in the original $130K and the investor would only net 9K from the sale. Would the book be referring to the 9K plus what she cashflows monthly from rents?
TIA. I apologize if this is confusing. If this is posted in the wrong forum please let me know and I will take it down.