‘HOW’? Ah, there’s the rub. All we’ve done thus far has been to define the problem. Solutions are the tricky part. By and large, if you don’t provide an acceptable solution, you don’t make your 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.
There are no short cuts to problem solving. It requires broad knowledge of conventional and creative finance, management, tax law, exchange techniques; zoning, density and use regulations, Options, Leases, and ‘paper’. Lack of knowledge is why so many people fall short of achieving their estate building goals in real estate. They aren’t prepared to study the field on a more or less continuing basis despite the fact that knowledge in the field commands one of the highest premiums of all and ignorance extracts the highest costs.
In the process of finding solutions, you can break things down a little. Do the people need cash now, or can they wait? If they have income tax problems, would it be better for them to exchange their property for something that they’d be able to borrow against? Or, would an installment sale be better for them? Maybe more tax shelter? Is occupancy of their current premises critical to them? Are rising property taxes the culprit? Or inflation? Do estate taxes affect decisions? What about management and maintenance? Do they need a secure income stream? What do they need the cash they are receiving for? Can you help them meet their goals in some way that saves you cash, gain and interest?
In almost every instance, except dire distress, you’ll have to ‘sell’ your proposed solution to the sellers in order for them to understand and accept it. Straight cash for large discounts is simple to understand, but difficult for sellers to accept. On the other hand, the subtleties of ‘paper’ and terms can generate equivalent profits for the buyer and are a lot more acceptable to the seller. It really pays to learn all you can about creating and using mortgage notes in buying houses.