Request to clarify a certain statement in your Income For Life eBook

by Ron
(Toronto)

On page 34 of the book, the second paragraph mentiones: "...Plus at the time of sale to my tenant, I get my down payment of $11,650 back..."

I DO understand the $140,000 less $4,500 less $7,200 less $116,500 = $11,800 profit. However, The closing Cheque of $23,450 is the sum of two amounts: the $11,800 profit and the amount of $11,650.

I would like to undestand who exactly pays you back this $11,650 down payment? Is it the tenant? Is it the lender from whom you initially obtained the mortgage?

If it's from the tenant (who now is buying the house from you) then I can not see where in the details provided about the whole arrangement with the tenant it was mentioned that he/she will pay you $11,650 IN ADDITION to the $140,000.

If it's from the lender then again, I can not see where was it discussed that the lender would pay you back your $11,650 down payment.

Your clarification would be appreciated.
Sincerely,
Ron.

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Feb 05, 2010
It's Part Of The Purchase Price
by: Anonymous

He gets the down payment back because it was part of the purchase price.

He invested a down payment of $11,650. He borrowed the other $104,850 from the bank.

On the sale, he receives $128,300 at closing. He then has to pay back the $104,850 he borrowed from the bank (the example seems to ignore any paydown of principal). The difference is $23,450. Of that, $11,800 is profit (the difference between his purchase price and the sale price after credits to the purchaser), and the remaining $11,650 is his original down payment.

Feb 04, 2010
Down Payment from a Canadian Real Estate Investment
by: Tom Karadza

Hi Ron,

Thanks for the question!

We should probably make it more clear. No one actually pays you that money back. When you get the money from the tenant's bank on the sale of the home and go to pay the mortgage you had on the property you'll keep the difference.

The outstanding mortgage isn't the $116,500. It's $116,500 less your original down payment. So when you go to pay off your mortgage with the money you get on the sale you'll have your down payment amount as "extra" money that goes to you.

I don't have the book right in front of me as I reply so I hope this is making sense!

Tom.

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