I've been focusing on wraps instead of rentals because I find that the margins here in the DFW area are really tough to cashflow for rentals (if you are conservative with reserves). Also property taxes go up so much all the time and you often can't raise rent enough to cover the difference. So I've been focusing on wraps and I just finished my second one. I didn't write about my first one because I wasn't really happy with how it went, but this second one was much better.

Here are the numbers:

Purchase price: 82k

Renovations : 23k

Staging/landscaping (did it myself): 475

Holding costs: 1250

So at this point I'm all in for about 107k. Fortunately/unfortunately the renovations process took waaay longer than expected (had some trouble with contractors), so I was able to get a cash out refi with six months seasoning. The house appraised for 140, so I was able to get a108k loan, minus 5k for loan closing costs.

My loan:

[email protected]% : Monthly PI payments = 547

Now I sold it via owner finance for 139k, 11k down, 10% interest. Almost all of the 11k went towards closing costs, commissions, etc, but there was about 1700 left which lowered my invested capital to about 2500

128@10%: Monthly PI payments to me = 1123

1123-547 = 576!

The best part of this is that I don't have to worry about maintenance or capex or taxes or management or anything, because I'm just the bank

The worst part is, that in 30 years, I will not be the one who owns a free and clear property, my buyers will be. But right now this strategy is preferable because it allows me to make much quicker progress towards to goal of quitting my day job.

There are obviously risks with this approach, most notably: 1.The buyer stops making payments, and 2. The bank exercising the due on sale clause.

I plan to stockpile the first year of payments so that if I have to foreclose (and I hope I never do), I will be able to make my payments on the underlying mortgage until I can get the property performing.

If the bank calls the due on sale clause I will either have to come up with the money to pay off the balance, or sell the note at a discount.

Here are some before and after pics: