Hot Tips For Real Estate Investors - Part 4 15.
Ask that half of your monthly payments be applied to the purchase
price of the property if you decide to buy. If he balks at that sum
you can go for a lower credit or agree that the $3,000 cash can be
added to the purchase price if you decide to buy at the end of the
option period.
With $500 of the $3,000 you can bribe the bad tenant to be
out of the house within three days. Use some of the money to get
the place cleaned up and looking good. Then find a good, solid
tenant.
You just put come cash into your pocket and have a rental
house that will produce positive cash flow for the next three years.
At the end of that period you can buy or not depending on interest
rates and the rental market. You might even get the owner to help
with the financing when you are ready to buy.
This kind of situation will pop up now and again if you are
regularly looking for houses to buy. It might not work exactly as
above, but keep the idea in mind. If you find a motivated seller
with a property that does not make sense financially, ask the owner
to pay you to take over his problem. Then structure a deal that will
produce positive cash flow.
The ability to be a good rental investor and manager has
value. Get paid for your skills.
16.
16. Rent Before the Close.
As part of your purchase offer require that you be allowed to
show the property to prospective tenants immediately upon the
acceptance of your offer. Also include in your purchase offer the
following"
"This purchase shall not close until buyer has found acceptable
tenant to occupy the home."
This gives you time to find a tenant who can be ready to
move in the day escrow closes. This will allow you to collect the
first months rent and a security deposit from the tenant and apply
that sum towards the down payment.
17. Web Auction?
Take a look at www.auctionbyowner.com . Yes, it is a list of
homes being auctioned by their owners. You can search for
properties by state. As we write this it is a new web site and does
not yet have many homes. It might be worth checking as time goes
by. (The web site was active at the time this was written.)
17.
18. Profitable Closing Date
When buying small apartment buildings choosing the closing
date for your purchase can help reduce the cash required for the
down payment. Rents, taxes and other items are usually prorated
as of the date of closing.
Stipulate that the closing date must be on or slightly before
the first of the month. Then you are entitled to that month’s rents
and security deposits (transferred from the selling owner) and you
can apply those funds towards the down payment.
19. Pledge Your Life?
A deal where you are offering the seller a note for a portion
of the purchase price. Seller is reluctant to accept the paper. Offer
to take out a term life insurance policy on your life with the seller
as beneficiary. Term life is cheap and that may be enough security
to swing the deal.
20. Handyman Partner
Generally buying properties that need more than minor fixing
is not a good policy for the small, inexperienced investor. Your
time is better spent finding, buying and managing good houses and
tenants.
18.
If you are finding a lot of "fixer" properties you may consider
an informal partnership with a handyman. You find and buy the
properties. Next you pay for the materials needed for fix-up (your
handyman could go half on this if he has the money). The
handyman does the work. Then you sell the home. From the
proceeds pay yourself and the handyman for your out of pocket
expenses, then you split the profit 50/50.
You must make good deals so the profits will be attractive to
both of you. The handyman must be trustworthy and reliable. He
must get the job done as quickly as possible.
You would buy these properties using as little cash as
possible. Perhaps a 90-day option (with the right to renew for
another 90 days) with a small amount of cash as option
consideration. No monthly payment during the first option period.
Then you could find a buyer before you had to buy.
21. Give What You Got
You can be creative when dealing with motivated home
sellers. Offer to trade services for all or part of the down payment.
What can you do? Prepare the sellers income tax for the next five
years? Put a new motor in his car? Rent a truck and move his
furniture and belongings?
As you talk with a seller listen for anything he or she might
need that you could supply. Cash is precious. Use it as a last
resort.
19.
22. Tax Sales
Many counties have annual property tax sales. They auction
property that the county has acquired in lieu of delinquent property
taxes. You can often buy vacant lots at very low prices. Use them
to give to sellers as down payments instead of cash or all cash.
23. Paper and More Paper
If you sell a home and take back a note as a portion of the
sales price you may be able to use it as collateral when you borrow
money. You can use the borrowed money to buy another home.
This is known as hypothecating and it enables you to avoid
selling the note at a discount to raise cash. The interest you pay on
the new loan may be tax-deductible and that could give you some
help with your income tax.
24. Another Note Idea
You sold a property and carried back a note. You are
receiving payments on the note and that is giving you taxable
income. 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. |
