Remarkable money source,
you need to know!
Remarkable Money source for creative real estate investing is laid out in this article.
Are you wanting to be a creative real estate investor but haven't got started because you don't have lots of cash? You are not alone.
Over the years, I have met many talented and hungry people (not hungry for a burger ) but hungry to succeed as creative real estate investors.
One of the biggest obstacles they face (at least in their own minds) is a lack of money or funding. They think, what if I go out and find a deal where the seller says yes.
Like that would be a bad thing. After all getting the seller to say yes is what this business is all about. But it paralyzes new investors.
In their mind, they think if they find a seller to say yes to their offer, they can't close because they don't have the money.
I will show you a way to eliminate that fear.
This is why we call it creative real estate investing.
DO NOT, do what some of the big seminar "guru's" tell you to do. Which is go call all the credit card companies that you already have cards with and get them to raise your credit line.
These guys are NOT helping you, they are helping themselves, so they can sell you more or advanced courses from them!
Now that I got that out of the way we can move on.
What is creative real estate investing?
It is using the tools available to solve the seller's problem. As creative real estate investors we are like doctor's, they tell us their problem and we present one or several ways to solve their problem.
Why do we use creative techniques? Most people wanting to get into this business, want to do it because they are not making enough money at their job. They are looking for a better life for themselves and their family.
In other words you are broke. I was broke too when I started.
You will need some money to invest in your education in order to understand creative real estate investing and the ways you can solve seller's problems. I'm sorry, but a one weekend seminar will not be enough. You are learning a new profession.
It's sort of like going to college, except that you will make more money than most college grads for a much smaller investment.
A very quick way to learn this business is by having a mentor or coach that can work with you. Giving you guidance, training and feedback and that can answer all you questions as you learn. It will greatly accelerate your success.
Let's get to the actual remarkable money source and the how to of the funding.
We'll assume that you have done some marketing and or networking and found a seller who is willing to work with you to solve their problem.
So what do you do next? You need to find out some information about why they are selling. You need to find "where it hurts" and what the seller wants to accomplish.
You need to know why they are selling, (it could be for numerous reasons, such as divorce, job transfer, medical bills, etc.). What is the timeframe they must sell by. Are they flexible on terms, price, timeframe, etc.
Not all sellers will need to sell and or they aren't flexible at all. These are people that we probably can't help. After some practice, you be able to spot quickly who you can work with and who you can't. Don't waste your time on the ones who are not flexible.
We also need to know about the financing on the property, things such as mortgage balance, payment amount, are they behind on payments, interest rate, type of loan, etc.
Remember you are the doctor gathering info so you can make the most helpful suggestion as to a solution. There are many easy ways to get this info from the seller without seeming like you are just being nosy.
The property probably already has a loan on it so we want to use that as the bulk of the funding, depending on the balance.
Let's say the house is worth $200K and the balance owed is $150K, so hypothetically the seller thinks they have $50k equity. This equity is only on paper.
What is the cost for the seller to list and sell their house with a realtor?
We'll start with the 50K equity. Then subtract possible costs to sell the house using a realtor.
- $12,000 (6%) commission
- $7,500 3-6 months holding time until close (6 x $1250 PITI)
- $5,000 repairs required by buyer or lender
- $4,000 2-3% closing costs, title ins, fees
As you can see, there are many costs to the seller when selling a house conventionally. If there is little equity, these costs will eat away at most or all of the "equity" the sellers thought they had.
If the seller is in a situation that they can't wait for months to see if the house will sell. It may be a better solution for the seller to sell to an investor.
Any price that you agree to above the $150,000 could be paid to the seller in numerous ways. Maybe defer the payment until you sell the house, part of which is paid now and part later, monthly payments. It can be whatever you agree to.
A real estate investor can offer different solutions, such as subject to, lease-option, straight lease or a master lease or even just a straight option. All of which DO NOT involve new financing but can close quickly. Therefore, a remarkable money source is already in place.
Any of these solutions could work for the seller. Which will allow you to get control of the property without huge down payment and cost of getting a new loan.
If you were a cash investor you would have to buy it for less than the loan balance for it to work financially. A formula normally used would be 65% of value ($200,000) minus any cost of repairs.
So $200,000 x .65 = $130,000 - $5,000 (cost of repairs) = $125,000 cash offer price. This would very likely, not work for the seller.
Remember the cash investor, is giving up the further use of his money, so he/she needs to get a good return to their investment. This is why they have to buy at such a discount
SO many times there is a remarkable money source available to you that you didn't even realize was right in front of you. Thousands of investors are doing this on a daily basis. Why not YOU?