Let's talk yield on individual lots/homes: While existing individual Mobile Home lots in some cities can cost $75,000 and more, an individual bare-bones 1 acre lot in a rural setting without any amenities can be developed for about $10,000 - $15,000 depending upon whether or not there is existing road access.

I got a call from a Wholesaler that had a deal.  He managed to get the Seller to accept $35K Cash, ARV $75K, Repairs $10K.

He said she would Only accept Cash and would not do Owner Financing.

I did a little research and found that she tried selling the house with a Realtor for 6 months with no success for $49K.

I spoke with the Seller, she really wanted $45K and the home was Free & Clear.

So I told her I could not give her the $35K Cash, but I could giver her her full asking price of $45K, paid as follows:

One of the features of a tight credit economy is that sellers, who would never have considered carrying the financing on the sales of their homes, become much more flexible; and buyers who have been denied access to institutional financing are able to buy a home with seller financing.  Oddly enough, this can create a very lucrative, albeit a different market, for people who understand "paper".

I get a lot of questions from people who are trapped in houses that they bought only to re-sell for a profit. Now the market has stalled and they can’t afford to hang on to their real estate property. What do they do? They list with a real estate agent (as if he or she had some magic potent that would suddenly produce buyers) and sit around hoping for the best. That’s about the same thing that their agent is doing too.

Read about the first deal a CashFlowDepot.com member did 3 years ago.  It's a deal that paid him $35,000 in cash PLUS he makes about $200 per month in cash flow PLUS he still has a lot of equity.  Do a search for Deal Stories in this blog to read about other deals CashFlowDepot.com members have done.

Learn how you can use real estate you already own to help you acquire more properties without refinancing and without going to the bank.

There is a story behind every real estate deal and a valuable real estate lesson too.  So, I created a new section called DEAL STORIES.  I'll share some of my deal stories but I'd like for you to share some of yours too.  To submit your deal stories, email the details to jackie@cashflowdepot.com  See details below about the information to submit.

In the previous post I described how I set up a co-venture arrangement on short notice using a long term real estate Option. Now let’s see why this worked out for both of us:

A couple of months ago I was approached by someone who wanted me to invest in a fixer-upper deal that he had found. On the surface of it, it was a good deal. The house could be bought for about 60% of current value, and fixing it up would be profitable. At the last minute, the institutional lender had reneged on the loan and with just two days before the contract expired, there was no time to reapply with another lender. Nor was there time for me to be able to do any due-diligence, assess the local market where the house was located, check out the costs of rehab, etc. Still it seemed like an opportunity. What could I do? What would you do?

These are challenging times for many real estate entrepreneurs who are finding that the techniques and strategies they’ve relied on for years just don’t work anymore.  It’s time to look for new ways to create profit centers.  The good news is that there are many NEW opportunities for those willing to make some changes in your business.

A real estate Option is the most useful of all real estate tools when it comes to making money. Not only can it control future profits, but also current profits when used for that purpose. We are all familiar with the benefits of Optioning land at a given price, then getting it rezone for a higher use, or finding a builder/developer who will joint venture to increase its value, or putting a mobile home on it to increase its value before exercising it.

I should warn you that Lease/Options aren't always the best tool for the job for a few reasons. First of all, although a lease/Option can generate more rents, it conveys an equitable interest in your property that sometimes forces you to go through a foreclosure rather than a simple eviction. And, sometimes the tenant actually goes out and gets a loan and buys your house right out from under you. Even though you might have made a profit, you’re forced to go out and find another house to replace the one that was sold, or face the prospect of paying capital gains taxes and having your money earn far less than it might have earned with the rental house.

On the other hand, there is a time to offer an Option. That’s when you want to sell in a slow market where there either is no financing, or where your tenants have lousy credit scores but are motivated to pay top dollar for your house

All around the country, there are larger luxury homes for sale that aren't feasible as rentals, but which could generate huge profits using Option techniques. Because of the down-sizing of corporate America and Government institutions, many formerly high-paid executives are in a cash squeeze with high house payments which no longer fit into their shrinking budgets. The market for these houses is extremely thin in many areas and sales are slow. Cash invested now can buy a disproportionate share of the eventual sale proceeds. Here's a way that these Options can be structured:

Somewhere along the line I stopped being a real estate agent and started being a principal. As an agent, I’d have had a fiduciary with the homeowner to get the best price and terms. As a principal, I had no such fiduciary and was able to use any skills I might have had to get the lowest price and terms. My fiduciary with the buyer was to deliver the house at my contracted price, which earning $30,000 made me quite happy to do. But when the buyer turned the house down, I could buy it myself and do with it what I wanted.

Distress and foreclosure opportunities have attracted so many buyers that there seems little opportunity for the average person to complete a purchase.  But when one approaches distress in creative ways with real estate options, much of the competition just doesn't appear.  Here are some examples:

Sometimes it's impossible to try to gulp down two deals in a single transaction, so a sequential structure provided by a split real estate option is required.  Tim needed $10,000 to buy into a special stock deal.  George only had $5,000 and he was holding on to it.  Tim offers George a $10,000 cottage plus an Option on a lot he values at $13,000 in return for $5,000 cash plus George's promise of an additional $5,000 within 30 days to close the Option on the bargain lot.  Tim then OPTIONS the stock with his $5,000 to hold it for 90 days.

"Buy-Back” Real Estate Options are used in many areas of business.  Banks and Money Market Mutual Funds routinely increase their yields by selling government securities with the right to buy them back at a price that will generate a yield that will attract buyers. 

What one can do with houses, one can sometimes also do with privately held seller financing. Suppose in the foregoing example in the last post about Buyback Options that the transaction had all been done with seller financing. Now the seller has a promissory Note secured by his former property that is paying 10% interest only, or $25,000 per year, for ten years. He’ll or his assigns receive $250,000 at that time.

Leases and Options resemble interest-only Notes and mortgages with balloon payments when you come to think of it.  A properly drafted Lease incorporates a promise to pay with security for the promise in the form of some sort of collateral in the same way that a Note and mortgage do.  The Option requires a lump sum payoff - or another promise of payment - just like a balloon note.  Oddly enough, when people see a Lease and an Option, they don't perceive the possibilities for wrapping either - or both - of them.  Read on.

How can real estate Options secure loans?

I was recently approached by someone who had a quick deal that promised to make him $50,000 in just a few months. He already had a potential buyer lined up to lease the house on a five year lease. At the last minute, his lender had dropped a bomb on him at the last moment, and refused to lend him the wherewithal to buy the house. Now he needed a quick loan to finance the house or he’d lose it. The problem was that there wasn’t enough time round up another loan, nor was there enough time for me to do all the credit checks of him and his buyer to see whether or not he was creditworthy. (Unfortunately, this seems to always be the case when people need money.)

The five most important words in any real estate transactions are WHAT'S IN IT FOR ME?

What are some of the advantages to using real estate Options? Of course specific benefits will vary according to the individual needs of the parties, but we can make some general statements with regard to Options that might apply to everyone at one time or another.  Let's start with LEVERAGE.

The profit motive can bring out the best of us, encouraging us to use creative tools such as real estate options, but can also bring out the worst of us. There were a couple of friendly rivals among Exchangors a few years back named Cliff and Art. Art was far and away the most successful financially, but Cliff was the more artful – as in artful dodger – of the two. No matter how hard Art tried to best Cliff in a deal, he never quite pulled it off.

        Many readers of this letter may not be able to use either seller financing or investor financing to buy houses because of lack of investors or sellers who would be willing to provide financing.  But, by using Options, they can buy, sell, and hold houses without the cooperation of either investors or sellers. 

The essence of creative financing is to be able to transfer equity between buyer and seller with little or no money down.  This requires at least two highly motivated parties who are willing to work together, and knowledgeable enough to make a deal.  When a third party “deal-maker” is added to the mix, part of the profit can be carved out without any investment at all.  Learning how to become that third party is a major key to being able to earn profits on every buy/sell/lease/Option transaction.  To jog your imagination, here are ten ways that a deal can be made using creative financing with very little cash; but you’ve got to propose it.

There are two main reasons why landlords offer tenants a Lease/Option on rental houses: They want higher rents, but don’t necessarily want to sell their house; or they do want to sell their house and want to give the occupant a chance to either clear up bad credit scores, or save up a down payment, or earn some kind of rental credit attributable to rents paid or improvements made.

Many of the people who are now in trouble with negative cashflow and dropping equities should have been looking at Option contracts.  Not to be confused with Lease/Options, pure real estate Options are merely purchase contracts that can tie up a house, but that allow the person who buys the Option a chance to "test drive" a house to see if it can be sold before committing to closing on it. Instead of confronting high payments in a falling market, the Optionee simply walks away unscathed. Why anyone would run all the unnecessary risks

You can earn money working from home when you learn how to master lease real estate.  Master Leasing is a way to earn money every month from real estate that you don't even own.  Usually a Master Lease requires no money down.

    Because of foreclosure sale competition, you have to “firstest with the leastest” to make money. Pre-foreclosures are one way to do this. Try to buy a CD listing of out-of-area owners from the tax collector Make low offers to buy properties with unpaid property taxes by sending letters to delinquent owners. In the following paragraphs I’ve inserted some distress market approaches that I extracted from my little booklet called “Fifty Nifty Ways to Buy Foreclosures from Distressed Owners and Lenders”. These are to help you to structure transactions that will be acceptable to the other party and profitable for you. All of them won’t work all the time, but, it will pay you to try to build on them to improvise concepts that you will be able to apply in your specific area:

Failure to reach agreement as to value can break a deal wide open, so it pays to negotiate around this obstacle. This pretty well sums up the way that negotiation techniques earn their keep when buying or selling, and can secure quality homes at wholesale pricing.

2. Nobody is likely to be very upset over the loss of a small slice of bread.

How do you find the right properties without Brokers? Cold-canvassing in the neighborhoods, putting out flyers door-to-door, running ads, paying "bird dogs", direct mail, and contacting lenders all helps. Looking for people to whom "creative finance" boiled down to placing 2nd and 3rd.loans against properties. These virtually guarantee feasible properties In foreclosure situations.

There are three opportunities with pre-foreclosures.  The worst people to deal with are dead beats who are going to ride out the foreclosure and refuse to move out after the property has been bought either before or at sale.    The best people to deal with are families with a large equity and otherwise good credit record who feel terrible about not being able to make payments.  
  

     Changes that are going to be bad for a lot of people are going to be good for those who can exploit them. Tight credit promises a cornucopia of opportunity for those who buy foreclosures.

When I was about 6 years old, I was afraid to try to swim. I sank like a rock every time I picked my feet up off the ground. So my Uncle took me out in a rowboat and threw me out of it into water that was over my head. In a sink or swim situation, I learned to swim. Fast! Then I discovered something odd. Once I gained the confidence to start swimming, I couldn't sink anymore. I couldn't remain under water without effort. I automatically bobbed to the surface. What caused this phenomenon? Confidence. As long as I believed I couldn't swim, I couldn't. Once I believed I could, I could. This same principal applies to successful negotiation. You've got to really believe that you can get what you want out of a deal before you start. Learning to do this isn't easy, but it's something that everyone can attain with effort.

When negotiating for price or terms, there is no incorrect answer. It all depends upon the viewpoint of the people involved. Who's buying? Who's selling? Why? What are their objectives? How much cash must actually be required to make the transaction work for all parties? What are their income levels and tax brackets? What are their ages? How sophisticated are they? What has their previous financial experience been? What are their security needs? How motivated are they? Why?

Want to know the secrets to success?  I've been pondering the enigma of why bright, energetic, ambitious people don't become financially successful despite all their efforts. I think I've come up with one answer, although with such a provocative question, there are bound to be others. For simplicity's sake, I've divided people up into different groups.

  When negotiating a purchase, the 'WHY' question precedes What, but when selling, the 'WHAT' issue should come before the 'Why'. You can't scratch an itch until you find it. Because negotiation is essentially a problem solving technique, you've got to understand the motivation of the other party. I have a sort of pecking order for motivation. I place greed at the very bottom in terms of probably negotiating success. What I look for are personal factors.

If you don't provide an acceptable solution, you will not be able to negotiate a deal. But the more thoroughly you understand the problem the more probable that you'll be able to find a solution. The most interesting part of this process is that other buyers can't compete effectively once the seller sees that you're trying to solve his personal problem while acquiring his property.

 Last time we were trying to solve the riddle of being able to buy houses at today’s prices and rents that would be feasible as long term rental investments that would generate current positive cash flow. I think trading in one house for another is the solution, but it’s almost impossible to find two people who can make a straight property swap.

If you go to foreclosure sales, the sale of many of the houses scheduled for sale is postponed at "beneficiaries’ request". This means that something has happened to make the lender think it is going to be paid off in full. Usually, when a loan is in default for a few months, the loan file is handed off to the "Loss Mitigation Department". When I hear of a lender staffing such a department, it sends a message to me loud and clear that the lender expects to take a loss, and the only question on the table is how much of a loss. I like to negotiate with lenders who have these departments... here's how

If ignorance breeds fear, and fear blocks people from becoming financially successful, using single family houses to help you climb capital mountain is a proven remedy for mediocrity. Millions of people have created nest eggs simply by buying a house using mortgage debt, then paying off the loan over time. Let the record speak for itself; how many people do you know personally whose lifetime savings are represented by their home equity? Today wouldn't be too soon to get started buying.

Never have I seen a better time to master lease houses. Owners can't sell and buyers can't buy; landlords rule. Now is the time you can become a landlord without taking on a debt or investing a lot of money. Owners who have moved and needed to sell must now lease their mortgaged homes if they hope to avoid foreclosure.

You should be making at least one formal written offer every day, 7 days a week, 365 days a year. Where people go wrong is to make an offer, then to sit back and wait for a reply before making another offer. Learn how you can get more of your offers accepted

Seller financing is the fastest way to sell a house quickly.  Learn how you can sell with seller financing even if the house needs a lot of work.

Learn how to make money with foreclosures and avoid competition.  "Pre-foreclosure" is one of those buzz words that get passed around in real estate investor clubs as something loaded with profit potential that offers a sure, easy, fast path to wealth and riches.  No doubt there are profits to be gleaned from contacting people who are faced with foreclosure and who will surrender all or part of their equity in return for debt relief, payment relief, or shelter; but there's many a slip betwixt cup and lip.

Learn how you can avoid difficult real estate evictions by not renting to certain people in the first place.

Real Estate Options will allow you to control real estate, equity, and cash flow with no risks, no cash, no credit, and no experience.

Developing and managing mobile home communities can be extremely profitable, but based upon the return on investment, it's hard to beat mobile homes themselves. Homes can be new or used, single or double-wide, bought and fixed up for resale, rented and written off, or held as inventory for sale, located in existing parks, private parcels, or on sale lots, financed privately or through commercial lenders. Let me give you some examples of a few ways mobile homes have been used to make extraordinary profits: