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How To Sell Your House and Generate Passive Income

By Jim Manning, Real Estate Veteran

Are you looking for innovative ways to not only sell your house but also generate passive income from the sale? If so, you’ve come to the right place. With over 15 years of experience in real estate and a team that has successfully completed over 3,000 transactions, I’m here to share some intriguing possibilities with you.

Agenda – Part 1

In this blog post, we’ll delve into how we helped a client make over $35,000 in passive income after selling their house. Additionally, we’ll explore a scenario where you can buy a more expensive house at a 7% interest rate and end up paying less per month than with your current 3% mortgage. Let’s break down three common homeowner scenarios and how these strategies work.

Deal Story: Turning Equity into Income

Imagine a scenario where a homeowner doesn’t want to move because they have a lower interest rate on their current mortgage. In this case, we stepped in and bought the property from her. Instead of receiving $200,000 at closing, she lent us the $200,000 on the property, generating over $35,000 in passive income over time.

Why Is This So Important?

Many people feel trapped in their homes because they don’t want to give up their lower interest rates. By utilizing this structure, you can still move to a new house without sacrificing your financial well-being.

An Example to Illustrate the Concept

Consider a current house with a $200,000 3% loan, resulting in a monthly mortgage payment of $934. Now, let’s say you want to move to a new house priced at $350,000 with a 7% loan, which would typically result in a monthly mortgage of $2,695.84. That’s a difference of $1,761.84 more per month due to the higher interest rate.

Making the Move Financially Feasible

To address this challenge, negotiate with the buyer of your current house. They agree to pay you passive income after you sell, let’s say, $1,100 per month. They also provide you with $50,000 in cash at closing for your move. This arrangement lowers your net mortgage payment to $1,595.84 per month, which is $177.16 per month lower than if you had moved with the same interest rates and done a traditional sale.

An Exciting Twist: What if Interest Rates Go Down?

If interest rates drop back to 3% in a few years, you could refinance the mortgage on your new house. With a cash flow of $1,100 per month from the sale of your previous property, your net payment would be just $673 per month. That’s $261 per month less than your original house payment, even though your new home is worth $150,000 more.

Three Main Scenarios for Homeowners

  1. Own Property Free and Clear: In this scenario, you own your property outright and can act as the lender, financing the property to the buyer without involving a third party. This arrangement allows you to get a lien while the buyer gets the deed without exchanging cash.
  2. Zero/Negative Equity with a Loan: Here, you can sell the property “subject to” the existing financing, where no third-party lender or cash is exchanged.
  3. Have a Loan on the Property + Equity: This option involves owner financing a portion of the property and receiving a steady stream of income.

Two Other Outstanding Ways to Generate 100% Passive Income from Real Estate

1. Private Lending:

Private lending in real estate involves individuals lending their cash to investors for real estate investment deals. This financing is often needed urgently, and private lenders can choose to lend directly to investors or through hard money lending companies. This approach is perfect for investors who need quick access to funds for property repair and purchase.

2. Real Estate Funds:

Real estate funds enable a group of investors to pool their money and purchase multiple properties together. These funds consist of Limited Partners (LPs) who are passive investors and General Partners (GPs) who are real estate professionals responsible for managing the investments. Profits are distributed based on a predetermined waterfall structure.

In Summary:

Generating passive income from your house sale, private lending, and real estate funds are three favorite ways to invest in real estate without the stress of active management. These strategies offer financial flexibility, even in changing interest rate environments.

If you’re interested in learning more about these methods, be sure to explore my other blog posts on each topic:

  1. Generating Passive Income from Selling Your House
  2. Private Lending: An Amazing Way to Generate Mailbox Money with Minimal Risk

Unlock the potential of real estate to create truly passive income streams and take control of your financial future.