I was on a conference call today and wanted to see if my first impressions and therefore my conclusions were correct. Please advise me on your take. I will try to be as open as possible when speaking from the other side of conversations.

I was contacted about a real estate investment opportunity. Perhaps some of you have heard of this, although I am not going to mention any names.

For the mother, I can invest $34,900 in a company where they would find me a house (usually in the Midwest) and rehab it. Then he would be the owner of the house. ARV market prices for these houses are between $50,000 and $50,000. They would then provide up to a year of payments at $400 per month while they find a buyer for my house. I would then take the financing of that home to the ultimate buyer in a 30-year PITI note. There is no balloon payment, so you have strong cash flows. Mortgage payments are based on a 9.9% interest rate and market RENTS. Therefore, the final buyer pays based on market rents. Your down payment is about 2% of the value of the house, usually around $1,000.

The cash-on-cash return on these in the first year is about 16-18%, plus the difference in equity from your home purchase and the actual value.

Here is my dilemma. I believe in the speed of money. So when you’re investing, how quickly do you get your money back. These are all cash offers. At 18% cash against cash, this would mean that you will be charged in approximately 6 years. A little slow for my taste, but good.

Another problem is that I am in the leasing options profession in Las Vegas, NV. Therefore, for one option, the tenant/buyer (not the actual end buyer at the time the contract is signed) is paying at least $2,000. I’d ask the same thing about a midwestern option, even if the price of the house is lower. This would mean a higher percentage of a down payment. Therefore, someone putting down $1,000 to buy a house is not as productive as a leasing option. And you lose control of the house.

The third problem is that all of these are done through a separately owned LLC that owns the note (and originally the property). If you have to foreclose, this is slightly more expensive than an eviction, in most cities and townships.

In conclusion, I didn’t see the advantage of doing a program like this unless you’re doing this as a small part of your investment portfolio (maybe 20% of your real estate investment) rather than just doing a rental or a Rent with option to buy. . I understand the humanitarian and philanthropic benefits, but the math is meaningless to me.

Please give me your opinion on this. The numbers and returns are higher than most stock or commodity markets and I wouldn’t mind promoting this to certain investors. I just need to know if your initial reaction is similar to mine or am I missing something.

Thanks for your feedback and happy investing!