Becoming a "bank" - Posted by AndyA

Posted by John Behle on November 18, 1998 at 22:59:57:

Paper vs. Real Estate isn’t an “either/or” decision. Sounds like your condo is a good little money maker. Nothing has to change as far as that is concerned.

Creation of paper works when it is created as “high yield” paper through either wrapping lower interest rates or turning a discount off the price into a “note equity”. If you are familiar with “Lonnie deals” - this is exactly the same thing. Lonnie just applied these time tested techniques for real estate and focused on the mobile home market.

Remember, it is the ownership of the condo that brings the rate of return - not the equity. The equity would be put to a much better use investing in paper. Let’s say you could borrow 80% on the condo at 8%. That could result in $24,000 to invest in paper. If you get at 4% spread on the paper - that’s only a 12% yield - then you would have increased your yield and cash flow while keeping your trouble free condo.

Yet, 12% is far too conservative. If you work the paper and improve it, your yield should go well over 30%-50%. Actually most of the yields are much higher.

See the article posted below called “Equity Arbitrage” for more information.

Becoming a “bank” - Posted by AndyA

Posted by AndyA on November 18, 1998 at 16:42:31:

I own a rental condo free & clear.
It’s worth 30k, and I earn 10% net from rent ($3,000),
even after allowing for 2 months of vacancy. With
less vacancy I earn over 12%. Expenses include management
so I have no T&T (toilets & tenants).

Is it possible to sell, hold a first, and earn a greater
yield? Current bank mortgage rates are around 7%, but I
would have to sell at $35,000 @ 8.5% just to get the
$3,000 I earn from rent. It looks like both the price and
interest rate are too high for current conditions.
Am I missing something?