Almost fifteen years ago I started buying and selling REO, foreclosed homes. I would buy these homes in bulk from banks, servicers, Hedge Funds, wholesalers or other private investors, and have transitioned to the auction houses. When I started, I made my share of mistakes, for example: I would buy homes that had heavy back property taxes. I bought homes without seeing them, I bought homes that ha
d high water bills that were liens against the property. The model was simple, I would buy homes priced anywhere from $500.00 to $5000.00. I would then put a "For Sale By Owner" sign in the window that would say $500.00 down and $400.00 per month. I would then have my cell number written in on the sign so people could contact me. I would then explain the program. The program was either a ten year contract or 15 year contract. I was not concerned about their credit, in fact, I wouldn't even look at it. The idea was to give people the chance to own a home that did not have the means to get a conventional loan from a bank. In turn, I would become their bank and they would pay my company. I got a lot of satisfaction for getting people into homes and also creating tremendous cash flow. I still buy homes and I sell homes in bulk to investors. Over the years the model has changed a bit, but the basic principal remains the same. I came up with the monthly payment by finding out what the market rent was in an area and I would then subtract that number by 50%. As an example: In Detroit MI. the average rent for a single family home is $800.00 per month. So I would make their mortgage payment $400.00 per month. The For Sale signs did all the selling and advertising. People could actually own a home for half of what they were paying for rent. I then would amortize the loan over a shorter period (seven years) at a fixed interest rate of 7%. That in turn would give me the sales price. A lot of investors today contact me to find properties for them since I have the conections to get such homes.
