Hot Tips For Real Estate Investors - Part 1 The Report
This Report is a collection of forms,
techniques and tips that can be valuable for the individual real
estate or paper investor. You will find tools you can use when
buying, selling, leasing and renting real estate or mortgages notes.
Often just one item found here may save you from serious trouble
or open the door for larger profits. Review the contents of this
Spectex.com Report now and again, so that you will not over look
an important point that might play a part in your next deal.
1. Option Flip
In your search for profitable investment properties you
occasionally will come across a good deal that you just cannot buy
yourself. State law prevents you from finding a buyer for the
property and collecting a fee from the seller for your services. You
need a real estate license if you are to be paid for acting as the
seller’s agent. Must you pass up this profit opportunity?
No! You can pay the seller a token amount for an option on
the property. Then you become a principal in the deal and not an
agent. You can ask the seller to agree to a 60 day (or any other
time period) option to purchase at an agreed upon sale price.
Terms of the sale are spelled out in the option agreement.
1.
You then have 60 days to find a buyer for the property at a price
higher than the figure you have promised the seller.
When you find a buyer an escrow is opened and as part of
the terms of the closing you will sell your option to the buyer.
That gives the buyer the right to buy the home under the terms you
worked out with the seller.
How do you set a selling price? In advertising the home for
sale add the equivalent of a real estate commission (usually 6% or
7%) to the price you have agreed upon with the seller. In
anticipation of some bargaining by the buyer you might add
another 5% on top of that.
When escrow closes you will receive the 6% or 7% as your
compensation for the option. That’s six or seven thousand dollars
on a $100,000 sale.
Even if you sold for a lower price and only pocketed two or
three thousand that’s not bad for a sixty-day period where you had
just a few hundred dollars invested in the option.
Your option consideration could have been $500 and the
option agreement could specify that the $500 would be returned to
you if you produced an acceptable purchase offer within the sixty
days. In that case you could get your money back at closing.
It is a good idea to have your option notarized and recorded.
That way the homeowner cannot successful cut you out of a deal.
Title could not be transferred during the sixty days unless you
released your interest in the option. Have a clause in the option
that extends the option period to the close of escrow if a suitable
buyer is found.
2.
The Option Flip is a way to generate cash flow while you are
building a portfolio of rental homes. If you can’t buy a home
determine of you could make a profit finding a buyer for the
property. If so, try for an option.
2. Your Office?
I don’t like to have people come to my home to do business.
The only time I will go to someone’s home for a meeting is when I
visit home sellers in their home. What are the alternatives?
If I want to meet someone on neutral ground I will suggest
we get together at a nearby restaurant like Denny’s. I will buy
them a cup of coffee and we can talk business.
I have worked with one particular real estate agent over the
years and I will sometimes ask her to reserve time in her office’s
conference room for my meetings. Because I am familiar with this
environment and the people I am meeting are not, I feel it puts me
in a slightly more powerful position.
You might be able to use an office or conference room in
your insurance agent’s office, where you do your banking or at an
escrow company where you close your deals.
It is a subtle thing, but in important negotiations you want
every advantage you can get. Using one of these borrowed offices
is almost the same as dealing from an office of your own. You are
on your home ground and the person you are dealing with may be
at a slight disadvantage.
3.
3. Credit Cards
Should you accept payment of rent by credit card? Yes, but
it is not practical until you have at least five to ten rental units –
houses or apartment units.
It is expensive to get credit card merchant status. Banks
seem to contract with sales companies to find new customers for
their merchant card services. These companies apparently make
their profit by leasing card processing equipment to merchants– the
card swiping consoles you see in stores. The rates are high and the
lease contract periods are for years.
Credit card rules are always changing, so it may be worth
your time to talk to you bank about credit card merchant status.
They may have a program that would be affordable.
Once you can accept payment by credit card you can do two
things. You could have a clause in your Rental/Lease contract that
authorizes you to collect the monthly rental payment from the
tenant’s credit card account:
4.
“Lessee hereby authorizes Lessor to charge the Lessee’s credit card
account on the last day of the month for the following month’s rent in the
amount agreed upon in this contract -$__________________.
Card # _____________________________________ Ex _______________
Lessor to deliver a receipt to the Lessee within five-days of the credit card
charge. In the event the credit card charge is declined Lessee agrees to
pay rent with cash or money order within 24 hours of notice. If rent is not
delivered within that time period the late charge will be assessed. Lessor
or Lessee may cancel this credit card privilege with written notice to the
other party. _____________________________
Lessee Signature
Your other choice would be to charge a credit card only if
the tenant fails to pay the rent due with the required check,
cash or money order:
“Lessee authorizes Lessor to charge the following credit card for any rent
due and unpaid after the fifth of any month. Said charge to include the late
charge of $ ___________________.
Card #__________________________________ Ex __________________
Lessor to deliver to Lessee receipt for credit card charge within five days.
Lessee agrees to maintain the above credit card account or notify Lessor
of the number of any substitute account.
Lessee Signature
People are accustomed to paying for most everything with
credit cards, so cards can be an almost automatic rent collection
system for property owners. The credit card bank takes 2% to 3%
off of the top of any charges, so be sure and increase you rents to
cover that discount. This document and accompanying materials are designed to provide authoritative information in regard to the subject matter covered in it. It is for illustration purposes only and presented with the understanding that the author and publisher are not engaged in rendering legal, accounting or other professional opinions. If legal advice or other expert assistance is required, the services of a competent professional should be sought. |
