I Think I'm Trashed, I need Rehab

No I am not entering the Betty Ford Clinic and this is not the National Enquirer to tell you about what celebrity has been caught doing what we were pretty sure they were doing.

Two years ago, my wife purchased a decent little REO in a state far away from where we lived.  The BPO was grossly incorrect!!!!  She purchased it in her IRA for $10,000 and it needed about $4,000 to make it into a rental which would bring in about $450-500/month.

We advertised it for sale on Craigslist for $20,000 with owner financing and found a local investor that had enough to do the rehab but not enough to buy and rehab.  We worked out the following for the financing.  $12,000 new first mortgage at 10% amortized for 36 months  but no interest or payment for 4 months while he did the rehab.  His payment would be $387.21/month. This gave him time to rehab and get a tenant in the property.  We then created a second mortgage for $8,000 to be amortized over 24 months at 14.82% and payments of $387.21/ month for 24 months.  No interest or payment on the 2nd mortgage for the first 3 years.  His payment remains the same for all five years.  His tenant will pay his mortgage off.

My wife sold the first mortgage to another IRA investor for almost face value and will keep the 2nd for her account.   She now has her money back, almost $2,000 in cash increase in her account and next year will start receiving her $387.21/month. for 24 months.  total profit to her non taxable IRA is over $11,000.  Buyer is now getting over $600/month.  WIN<WIN<WIN

Local investor got a deal he could not buy otherwise, seller got work done that is tough to do out of state, seller receives payments that rival that of the landlord, no management fee or vacancy, no late night calls.