Dick was an up and coming executive who had bought a large, attractive home in an upscale subdivision. He had put $45,000 of his savings down to reduce his payments, wiping out the bulk of his cash savings. Then he was downsized and couldn’t make his payments. Over the years, I have established a reputation for solving financial problems, so he called me.
It's natural for the fledgling investor to rely upon institutional lenders for mortgage money with which to buy houses. Banks and mortgage loans abound in good times. Lenders besiege investors with offerings of attractive loans at low interest rates. All people have to do is to arrange a loan or line of credit secured by their personal residence or other assets, then go out and find a house to buy. The problems with this is two-fold:
Continue reading “Private Money Financing – A Better Way to Go”
You'd be surprised at how much you can get simply by asking. I'm not talking in the context of negotiation so much as in the context of making an offer to buy a property from a motivated seller.
How can you tell a seller is motivated? By making a low offer - over and over again. When you make an offer and the seller doesn't respond, that's a pretty sure indication that you won't be able to make a good deal, and you might want to pass on to another buyer. That statement might not be true in a sellers' market, but it is in a buyers' market such as we have in most areas today.
Continue reading “Finding Motivated Sellers To Make Better Deals”
Betty Jo was a recently divorced go-go girl who was just about gone-gone. She'd set her sights on living in a swinging singles apartment house in order to find a new mate. Her present house represented more of an obstacle than an asset in her quest, but she needed the equity to be able to afford the rent for the apartment.
Woody's daughter wanted to go into business, so he bought a large house and converted it into funky retail space. The problem was that neither the public - nor after a short time his daughter - was much interested in funky retail merchandise. So the store stayed empty and abandoned for 4 years.
I am always on the lookout to buy defaulted notes from small loan companies. You know the kind that advertises on TV to consolidate debts or to finance home improvements. These notes can be bought at large discounts because the small lender doesn't want to foreclose and have to make payments on the underlying 1st mortgage loans.
Most of the time we think of seller financing as being provided by the seller when we buy, but when it comes to converting equity into cash flow, seller financing and leasing are the two principal techniques we use. The best thing one can say about seller financing that you provide to a buyer who is buying your house is that there are very few rules except to create a Note or Contract that spells out the terms of the transaction and to find a way to secure it. As a rule, when a seller provides financing, the price can be adjusted to reflect any risk that might be posed by buyer’s with lower FICO scores, and the interest rate can be fiddled according to the degree of motivation of the parties. Additionally, net settlement costs are usually lower when the seller can create the documentation he or she needs.
Interest amounts to rent on money. We've already seen how the power of compound interest creates wealth. To the person renting out money to others, there's little doubt that interest is a valuable source of income. On the other hand, when one is a borrower, interest not only increases the costs of doing business, but also increases the risk of default. Let's consider interest from the standpoint of someone who is trying to sell or buy a house to see if we can't gain some perspective on the subject.
There are two fundamental ways to make money with houses. One way is to buy it to sell or to rent it. The other was is to lend money to those who want to buy it or rent it. We've just about beat owning houses to death in the past dozen posts, but haven't said much about lending money to those who want to buy houses.
He can sell this unit for about $79,900 for cash. Under the HUD Access Program, a buyer with a reasonable credit score can qualify for 103% financing and also qualify for the first time homeowner $8000 cash tax credit. He should be able to sell out swiftly. He can wind up with a gross profit of about $38,000 with very little of his own money at stake. Wouldn't you be happy on either side of that deal?
