Help Her Out / Help Them In

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For me, success is measured by more than just money. It is also measured by personal satisfaction in helping people.

Rose is a mother of two small children, recently divorced from an abusive husband. Her deadbeat ‘ex' quit his job so he would not have to pay child support. To top it off, her company had a round of layoffs and she lost her job. After extensive searching she found a new job, but it is 300 miles away. She really struggled, sleeping on a friend's couch near her new job during the week, and commuting back home on weekends where her mom was taking care of her children. She listed her house near the tax-appraised price ($120,000) but after 6 months still had no offers.

I knew Rose from a Bible study we both attended. Here is what I offered her when her listing expired:

I bought her home for $100,000 subject to the first mortgage of $73,000. I paid her $5,000 cash and gave her a wrap-around mortgage of $95,000. The cash allowed her to get caught up on some bills and to cover the moving costs. She also paid all expenses of the transaction, which were greatly reduced by an attorney from our church handling it pro-bono. I had her tranfer the deed into a trust to give us some privacy and reduce the danger of the lender enforcing the due-on-sale clause.

I make Rose's first mortgage payment of $569 and send her $128 each month in the difference between her payment and the wrap-around. My PITI is about $850/month, and I rent it for $1000/month.

Before closing I advertised the house for rent, and had qualified applicants waiting to sign the lease as soon as I closed.

Lisle and Micah are a newlywed couple. His credit is good, but hers is terrible. Normally they would not meet my criteria for renters because of her bad credit, and the fact that he just started a new job after 16 years on his previous one. But here is what I suggested to them: I will overlook your credit problem if you pay me the first month and a half rent, the twelfth month's rent and the security deposit. (They moved in in the middle of the month, hence 1.5 months advance rent. But my first mortgage payment is not due for 1.5 months!) This amounted to $3500. Since they paid the twelfth month in advance, and our lease says they forfeit it if they default, I feel confident they will be good renters.

Bottom line: I bought the house for 4% down, but only $1500 out of pocket, which is effectively 1.25% down. I gained $25,000 equity for an investment of exactly $1500. And I have a positive cash flow of $150/month, so I will have my investment back in 10 months.

But more important than the monetary benefit is the satisfaction of helping Rose out of a really tight spot. And I helped Lisle and Micah to get into their first house at a time they probably would not have been able to rent an apartment. Win/Win/Win

Are there deals out there with better financial rewards? Sure, and I make deals like that also. But when you measure rewards in terms of helping people you sleep better at night.

Bill Crider
Georgetown, TX

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Help Her Out / Help Them In

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