NOTES FOR THE NEW YEAR DAWN RICKABAUGH
2006 – horrible tenant problems with a duplex that
needed a lot of work, neither of which she wanted
to deal with. We bought it for $125,000 with hard
money, fixed it up, sold it for $180,000. She was
happy, except for the capital gains.
2007 – she called me with another house she
wanted to sell, but she didn’t want the tax
Becoming someone who
exudes integrity and
engenders trust has been
critical to the success of my
personal and professional
endeavors.
consequences this time, and an installment sale
(IRC 453) was in order... which was perfect for me,
because I didn’t have to put up much cash or
didn’t inspire me. What I made doing business
qualify for a bank loan. I bought the property:
according to my vision:
Sales price: $100,000
Up front spread between down payments: $15,000
Down payment: $5,000
She carried paper: $95,000
Passive income each month: $203.22 ($713.20 -
Interest rate: 5%
$509.98) x 120 = $24,386.40
Term: 360 (due in 10)
Monthly payment: $509.98
In 10 years: $11,255.61 ($88,530.64 - $77,275.03)
Balloon in 120: $77,275.03
Total: $50,642.01
I didn’t want a remote rental, so within two weeks I
At least that’s how it stacked up before the market
sold it to Lady #2 who wanted to buy a home next
crashed.
to her daughter and grandchildren. She would
never have qualified for conventional financing, but
2009 - when the value of the property dropped to
had a nice down payment, and adequate income.
$65,000, Lady #2, who still owed me about
She bought it:
$99,700, asked for a loan modification.
Sales price: $122,000
I didn’t want her to walk away from her upside
Down payment: $20,000
down house because that would compromise the
I carried paper: $102,000
retirement income that Lady #1 was counting on,
Interest rate: 7.5%
as well as reduce the price she could get for the
Term: 360 (due in 10)
property if we had to resell it in the softer market.
Monthly payment: $713.20
Balloon in 120: $88,530.64
Both of them would be better off if I got out of the
way, so here’s what I did: Principal reduction:
I got offered $135,000 from an investor, but that
$7,000 (new loan balance $92,700)