Are you confused by subject to deals and how you actually make money?
Here’s a quick breakdown of the 3 profit centers (not including monthly cash flow) that you can create by buying a property subject to and selling it on owner financing.
How we make money:
1. On the loan balance vs the ARV (equity at closing)
2. Interest Arbitrage– if we are paying 6% interest and charging 8% or more, then we are making 2% or more every month.
3. Equity build up from the buyer paying down the underlying mortgage– as they pay us monthly, the underlying mortgage balance gets paid down, and our equity builds.
When they pay off the loan, we get a lump sum. (back end equity).
Cash flow is nice to have, and we prefer it, but it’s not one of the main profit centers.
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