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Houses Under Fifty
Thousand |
Purchase Property - Three Ways
You could purchase property for
cash, of course. If you have the cash, this can be the best way
to get a great price. What if you don't have it? Here are three
of you other options.
Two-Note Technique
A creative way to purchase property
that sounds more complex than it is. Make an offer for $360,000,
when the seller is asking $350,000. If the seller is asking $355,000
and probably only expects to get $340,000, why do you offer more
than the asking price? Because the seller will be financing the
deal, and he also needs cash, so you'll be selling one of the
loan notes. I'll explain.
Offer $360,000 in the form of
two mortgage notes, one for $300,000, and the other for $60,000.
Payments on the first might be $2,000 per month, and $400 on
the second. You'll have total payments of $2,400 per month (make
sure you still have cash flow). As part of the offer, you arranged
for the sale of the second note at closing for $45,000. That's
all a note investor is likely to pay for an "unseasoned
note". The seller gets $45,000 in cash at closing, and payments
of $2,000 every month for 30 years. The note investor gets your
other payments of $400/month.
The numbers are different in
every deal of this sort. You might have some cash. Maybe the
seller needs more cash, so the second note will have to be for
a higher amount. Interest rates, balloons, and your credit rating
all affect what a note buyer will pay for the note too. The point
is that you can create cash out of seller financing, meaning
you can purchase property with nothing down, or with less down.
Use A Partner To Purchase
Property
Join a local real estate investing
group. Start taking notes, names, and numbers. Our group meets
once a month. The best part of the meeting is the "I have
/ I want" part, where anyone can stand up and tell the rest
what they are looking for, or what they have to sell. I have
a list of people now that are looking for everything from mobile
home parks to fixer-upper homes.
So how do you use this information
to purchase property? Here is one of several ways: Make an offer
on a property, and include in the offer the right to assign to
someone else or bring in a partner. Call the people on your list
until you find one that will put up the down payment or arrange
financing as a partner.
When I announced that I had some
money at one meeting, three days later I got a call from a couple
that had the financing and down payment on a project arranged,
but needed a partner to bring in the money to rehab the property.
If the deal is good, you can find the money. If you don't have
a real estate investors group nearby? Start one.
No-Doc Mortgage Loans
No-doc loans used to be hard
to find, and may still be in your area, but they're everywhere
around here right now. The idea is that you don't need documentation
of a job or even income, hence the name "no-doc." The
bank loans based on your credit score and the property. I can
get 95% financing on a $300,000 house without any job or income
right now.
What's the catch? Well, apart
from needing either great credit or a larger down payment, the
interest rate will be higher. Now, suppose
you find a $100,000 fixer-upper and can put the $5,000 down payment
and the repairs on your credit cards. In this case, the few thousand
in interest over the six months you own the house isn't much
if you intend to make a $25,000 profit.
Of course the higher interest
will really add up if you are going to live in the house for
30 years. At the moment, the banks around here seem to want about
2% more for these loans than for conventional mortgage loans,
and that is a lot of extra interest over the years. Bottom line?
No one way is right in all cases. You can see why you need to
learn many ways to purchase property.
Houses Under
Fifty Thousand | Purchase Property - Three Ways |