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## Another Way to Flip

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**THE SCENARIO**
Recently, a customer (call him Ron) asked me for some help determining his yield on a deal he'd recently done. I've changed the numbers here, but the basic structure of the deal is the same.
Ron flips houses. That is, he buys them at a discount, fixes them up a bit, then re-sells them for a profit. The unusual thing about Ron's method is that he sells them *on terms*, that is he takes payment for the house over time, rather than getting all of the money in one lump sum.
**The question:** If Ron buys a house for $50,000 and sells it for $80,000 with 10% down, and carries the balance at 8.5% for 15 years, what return does Ron get on his money? For simplicity, we're going to ignore the "fix them up a bit" for this calculation, and we'll assume that Ron buys the house and then sells it on the same day.

**THE SOLUTION**
This one is relatively straightforward, and has two parts:
**Step 1: Finding the payment**
N: 180 (The buyer pays for the house over 15 years, which is 15 x 12 = 180 months)
I/YR: 8.5 (The buyer's interest rate is 8.5%)
PV: $72,000 ($80,000 minus a 10% down payment is $80,000 - $8,000 = $72,000)
PMT: (This is what I'm trying to find)
FV: 0 (At the end, the buyer owns the house free and clear)
**Step 2: Finding Ron's return**
Note: After receiving the $8,000 down payment, Ron has $50,000 - $8,000 = $42,000 left in the deal.
N: 180 (The buyer pays for the house over 15 years, which is 15 x 12 = 180 months)
I/YR: (This is what I'm trying to find)
PV: -42,000 (Ron has $42,000 left in the deal)
PMT: 709.01 (The buyer's payment from Part 1)
FV: 0 (At the end, the buyer owns the house free and clear)

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- Find out what the buyer is paying Ron every month.
- Find out Ron's return on the money he still has in the deal.

The buyer pays Ron **$709.01** every month for the house.

Ron makes **19.07%** on his $42,000.

What do you think? If you could, would you buy a house and then resell it over time rather than right away? Do you see anything about this that's better than owning a rental property? Or worse? Let us know in the comments!