Case Study: Free and Clear in 5 Years

We have Rental Property for Sale in South Kansas City:

  • 10106 Cambridge, Kansas City, MO

And for the most part, we really want to find a cash buyer to purchase  for all cash.

The home has a long term tenant who is paying $750 a month in rent and has no desire to leave and really is not asking for any updates or repairs.  We are getting bids on the repairs and for this example we will assume they will be about $10,000.

We are asking an As Is Price of $39,000.

In prime tip top shape it comps out around $65,000 and with the minor repairs would have a value of about $49,000.

But I wanted to explore the option of seller financing to see if it might be a scenario that an investor buyer would consider.  Our mentor has been pushing this scenario on us for a year and he calls it the 50/50 model and I call it the Free and Clear in 5 Year model.

So here’s what I would envision.

Down Payment:  $19,500
Financed Over 5 Years:  60 months
Interest Rate:  6%
Monthly P & I:  $376.99

Monthly Taxes:  $135.58
Monthly Insurance:  $34.42
Monthly Management:  $75

Monthly Rent:  $750
Monthly Cash Flow:  $128.01

So cash needed today would be $19,500 down payment and the $10,000 in repairs.

For 5 Years your cash flow would be a minimal:  $1536.12 each year with the rest going to paying off 100% of the loan.

In 5 years, you would then own the house free and clear with a monthly cash flow of $505 or $6060 a year.

At that time, the market values should have gone up a bit and you could do minimal repairs and keep renting the house out for the cash flow or renovate and resell at the new renovated market value or you could offer on lease option or seller finance for an even better return.

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