Good idea for a quick cash profit? - Posted by Rob (CA)

Posted by L.A. on December 25, 1998 at 16:49:24:

Of course FOLLOWING THE LAW, but I tell U what…in every community in the United States there are plenty of properties that meet the government guidlines for basements & attics !!!

Don’t kill the goose that lays the golden eggs if U haven’t made the proper phone call in your community.

Good idea for a quick cash profit? - Posted by Rob (CA)

Posted by Rob (CA) on December 23, 1998 at 23:55:27:

  1. Obtain a lease/option on a home
  2. Rent out each room in the home individually
  3. Sell the lease/option to an investor like a discounted mortgage

Example: In my city a 4+2 house rents for around $1100 and the average room in one of these homes rents for around $300
with the master bedroom going around $400-$450. Now lets suppose that I work a 5 year lease deal with Joe Leaser for $300 and pay him $1000 per month on it with the “OPTION” to buy it for the current balance of the mortgage in 5yrs/60mos

Meanwhile I rent the rooms to four guys Joe, Tom, Dick and Harry Rentor. The first three grab the three regular rooms at $300 each and Harry splurges on the master bedroom at $425 per month this means a total rent of $1325 per month and a lease of $1000 per month that is a positive cash flow of $325 per month if all variables stay in place. At this point sell the lease option to an investor for $2500 with the tenants already in place and make a relatively quick $2200 cash profit and the investor would have an already running money machine. Now the investor would have some risk of repairs and the tenants moving out, but if he keeps the rooms full(maintain the money machine) he would stand to collect a total of $19,500 in revenues from the amount of payments made above his lease all on an investment of $2500 ($17,000 profit, minus any repairs or other expenses that may come up along the way) which would make his possible yield astronomical! And he would have made me $2200 on a $300 investment plus some advertising.

Now I am a pretty optimistic person whose youth can interfere with realistic judgements. The reason I am posting this is because I haven’t seen any articles on this sort of real estate maneuver and I was wondering if some one could tell me what downfalls (if any) would be severe enough to avoid this type investment. I feel like I know much more than most other 21 year old college kids do about real estate and finance but that is not saying much!

Any advice would be very appreciated!
Thank You, Rob

Re: Good idea for a quick cash profit? - Posted by Robert McNeely

Posted by Robert McNeely on December 24, 1998 at 14:36:52:

I assume you are talking about college students renting these rooms. have the parents sign the leases & charge for the full year.

Oh…& don’t forget… - Posted by L.A.

Posted by L.A. on December 24, 1998 at 12:49:12:

Don’t forget that if the house has a basement, that can be rented too; plus if you partion off the living/dining room you will have (2) more rooms.
So a (4) bedroom could be made into a (7) room rental house !
With seven rents coming in…U will be able to move the house fast or keep it !
I suggest doing a combination of the two.

Hope this helps.

maybe, I’m missing something? - Posted by David Alexander

Posted by David Alexander on December 24, 1998 at 12:05:54:

$325 x 12 = $3900

19,500? where from.

Someone buying the cashflow would want you to secure or guarantee it in most cases.

David Alexander

Re: Good idea for a quick cash profit? - Posted by L.A.

Posted by L.A. on December 24, 1998 at 07:36:03:

U have a winner of an idea…BUT…don’t forget to factor in the cost of furniture.
Buy it all USED !!! In some cases you might get some things for free, but in any event don’t go over board…limit your spending to about $800 or less for the funiture including a refridgerator & used microwave.
Another thing that U must factor in is “utilities”. Will your residents split the cost or will U ?
I think it’s best that the landlord pick up the tab, but charge a little more rent to cover the expenses.

Just my .02

Re: Oh…& don’t forget… - Posted by Redline

Posted by Redline on December 24, 1998 at 17:05:22:

Uhh, depending on where you are you’re going to expose yourself to lots of problems by renting out basements and attics. Here it’s not allowed without proper variances, inspections and zoning. Lots of areas are cracking down on illegal apartments. (I’m assuming this is what you’re talking about).


Re: maybe, I’m missing something? - Posted by rob

Posted by rob on December 24, 1998 at 18:50:23:

its a 5 year lease.