October 11, 2007
Market Value of the Property: Php 1.4 M
Acquisition Cost: Php 700K (That's 50% OFF the price!) - NOTHING DOWN
Motivated Seller's Reason For Selling: The property will be foreclosed by a private creditor for Php 100K Only.
My Conditions:
1. The seller shall transfer the Title under my name at her own expense. She will shoulder the capital gains, transfer tax and miscellaneous expenses.
2. The seller shall shoulder the agent's commission.
3. When the title is now under my name, I will mortgage the property for Php 700k for a term of 10 years at 10% interest per annum.
4. The seller shall pay for the appraisal fee and bank charges for my loan.
5. The seller shall wait for the release of my loan as my FULL PAYMENT.
6. We will execute RENT-TO-OWN Agreement., being the owner's sister as my new tenant-buyer.
7. MY NEW CONTRACT PRICE: Php 850K, 10 years to pay at 18% interest per annum.
8. The tenant-buyer shall shoulder all the insurances and taxes for 10 years.
9. After completion of payment, the tenant-buyer shall shoulder the capital gains, transfer taxes and other miscellaneous expenses after execution of Deed of Absolute Sale on her favor.
10. NO Repair Cost.
From the above conditions, I owned my 6th real estate property with NO MONEY DOWN earning a passive income of Php 6K per month for 10 years. TRANSACTION CLOSED.
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After 3 months of good payment record, my tenant failed to pay the monthly amortization on the succeeding 6 consecutive months. The result: My tenant was evicted with NO Refund of payments made. Yes, I had a negative cash flow for 6 months due to non-payment of rent, but I sold the property again to another hungry tenant buyer through rent-to-own at a higher selling price of PhP 1.098M, earning a spot cash gain of Php 109,800 (New Tenant's Down Payment) and earning a higher passive income* of PhP 9K per month for 10 years.
*Monthly Passive Income = Monthly Tenant's Rent - Monthly Payment of Investment Debt
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