1. The Courthouse Steps price for a $60,000 Home is $20,000.
2. The Courthouse Owner invests an additional $15,000 in the home (this is a typical improvement investment).
3. The Market Value (determined from the RDI AVM) of the home is now $70,000.
4. The Courthouse Owner Must Sell for $25,000. (Total from 1 plus 25% per year for a maximum of 2 years.
5. Offer the Former Recapture Owner $1,000 (3-5% of the Must Sell Price )
6. At closing your Paper Profit is $45,000.
7. Refinancing the property yields, with a 10% Equity ($7,000 in this example), at 80% of Market Value a Cash in Hand Profit of $38,000. (Of course you now have a mortgage of $63,000)
7.1 In most cases, Lenders are hesitant to refinance unless the property has been held for at least one year. Most lenders are also reluctant to offer Cash-Out Refinancing. Check with the Lenders - you'll need one to obtain #7 above on the same day. In the worst case scenario, you would wait one year to obtain your profit.
8. Put the home on the Market and/or Rent It depending upon your circumstances. (The goal is to cover your monthly mortgage costs, plus insurance etc. and still have money left over.)
9. Use the $38,000 to obtain more homes the same way; e.g. Down Payments on Recapture Purchases initially financed for the Recapture Price at Closing and then Refinanced for Market Value. (These transactions can be Back to Back at closing the same day.
Compare this with the potential profit of the CourtHouse Steps First Owner. He garners a return of only $5,000 for the use of his money over less than two years, must invest the "Fix-Up" Capital which he loses under Recapture, and invests time and effort in worthless Sweat Equity.
You, on the other hand, made $45,000 Paper and/or actual Profit on a simple two-party closing in ONE DAY and you have the Asset as a Sale or Rental property to earn more money!
