If a seller is working through a real estate agent, the process of transforming the seller into a motivated seller becomes a bit more difficult; however, it can be done using creativity and persistence. Real estate agents and brokers typically list houses and want to be paid a commission once the house sells. Getting a seller to deed you their house is hard when working through a real estate agent because of the following:
- Most agents want to be paid cash for their commission. And most of the time when you buy a house “subject to”, it is because they owe too much on the house for a cash offer, and real estate agents may think, often incorrectly, that there is not enough cash to pay a real estate agent their commission in cash.
- Most agents do not understand the concept of buying a house “subject to” or on a lease option and many will discourage the seller from considering such offers.
- Agents have told the seller they can sell their house for cash, and the seller is expecting to bring them a cash buyer.
Do not be discouraged in these situations. If you strongly believe the seller will benefit from working with you and is properly motivated to sell their property, be creative and persistent. Here is one way you can work with the real estate agent to attain the end result that will benefit all parties involved.
Real estate agents may be more inclined to work with you if they cannot get a particular house sold and if the seller’s situation is conducive to your solution of buying the house subject to the existing financing. In this case, you can offer to pay the real estate agent their commission on the amount with which you buy the house; however, you will only
pay this commission once you close on the house with a buyer. This can be a year, two or three later. This situation typically works well for the real estate agent, the seller and yourself in situations where the property is unlikely to sell traditionally and the agent will not be paid at all.
Until my next post,
James
P.S. Did you want access to over 124 real estate courses including several full day seminars? Check out our Real Estate Investor Bronze Membership.
Structuring offers is a deceptively simple concept. You can learn the basics in a couple hours, but it takes analyzing hundreds of deals to really start to understand the subtleties. Use the Structuring Offers Checklist as crib sheet to remind yourself of some of the key concepts you will need when analyzing deals and structuring offers to sellers.
In the Structuring Offers Checklist we cover most of the basic strategies for analyzing deals including an all cash offer which is based on the 70% minus cost of repairs formula. As an aside, some investors use 65% minus cost of repairs and some people use whatever the maximum percentage their hard money lender will loan minus the cost of repairs.
For most of the offers that I structure I want to calculate the net operating income first and so we include that as a prominently placed, early step on the checklist.
We do include sub checklists for structuring subject to, lease option and owner financing offers as well which are very important if you are trying to buy properties using any of those creative finance strategies.
We also address structuring offers if you plan to wholesale the property with the key consideration for doing that being: knowing what you wholesale buyers are willing to pay. Knowing their buying criteria allows you to structure offers where they are excited to buy even with your wholesale fee included.
Until my next post,
James
P.S. Interested in learning more about how to analyze deals? For a limited time you can download How To Analyze Deals Volume #2 for free.
We break the Bills Checklist for property management down into two primary categories: automatic payments and manual payments.
Automatic payments include things that we have set up to automatically be paid like mortgage payments, property insurance and property taxes. We primarily confirm that these were paid and that the correct amount was paid for these. Once they are confirmed we log that it was done.
Manual payments are for most other bills that need to be paid manually. We may still use bill pay to pay them, but not an automatic, recurring bill pay service.
Once we have made the manual payments there usually is some logging to be done regarding the payment and that is included in our system for paying bills manually as well to completely document that payments were made and to keep our files organized for taxes and accounting purposes.
The system we have for paying bills is important, but becomes increasingly more important for real estate investors opting to work with private lenders and buying properties with owner financing or subject to.
Until my next post,
James
While it may take me a day or two after tomorrow to actually pull it down, you should consider today the final day to be able to download the Secret “Subject To” Tips And Tricks Real Estate Investor Course for 99 cents. It will be going back up in price to $24.99 very shortly after today.
The Secret “Subject To” Tips And Tricks covers information on buying “Subject To” that I discuss in the Real Estate Investing Strategies Working Right Now video that I posted on Friday. If you have not watched the video yet, I would definitely do that before I decide to archive it for Bronze Members only.
Until my next post,
James
Tonight for our Real Estate Investor Bronze Members I am holding a training webinar called Real Estate Investing Strategies Working Right Now. In this webinar I will be talking about which real estate investing strategies are working best right now and highlight some of the training materials we have for our Real Estate Investor Bronze Members that can be used to learn specific implementation strategies, checklists, forms and downloadable training courses on the specific areas.
These are some of the topics that I have on the outline to talk about:
- Wholesaling – Wholesaling is a great way to generate immediate chunks of cash as a real estate investor and a strategy that I strongly recommend for new investors wanting to get involved with the business as it will help you earn while you learn.
- Virtual Wholesaling – Virtual Wholesaling is similar to wholesaling in many ways except you are able to focus on markets that are not local to you in your wholesaling. You will be growing multiple buyers lists, employ marketing in multiple geographical markets–often out of state–and have key dream team members in those areas to help you.
- Buy And Hold – Right now a good long term Buy And Hold strategy is extremely powerful. Interest rates are at or near all time lows, the trend is that more people are moving toward renting and we are heading toward a period of high inflation meaning property values will likely rise considerably. A potential challenge is investor financing which I plan to address in detail for our members.
- Subject To and Lease Options – Buying properties “subject to” the existing financing or structuring a creative Lease Option deal are two different, but similar strategies that specifically address the investor’s financing challenges while still solving problems that many sellers have in our current market.
- Partnerships – There are many folks that want to get involved in real estate investing but do not have the time or expertise to really learn the business. There are some great opportunities for professional real estate investors that have the time and expertise to partner with folks interested in the benefits of real estate investing (income, depreciation, equity build up, appreciation and, in some cases, leverage) to work on the financing side with professional investors so that each of them could achieve more than they might otherwise achieve alone in a win-win partnership.
- Multi-Units and Apartments – While this is not an area of expertise for me since my focus has been primarily on single family homes, I see an opportunity in this strategy and I think for the right person it is something worth at least looking into.
In tonight’s training session, I will also be sharing the amazing resources that we have for the following as well to address the very specific challenges of financing on the side of of the investor buying and also for profitable exit strategies for investors as well:
- Owner Financing – Since this is a major area of focus in our business, I have some amazing resources and training materials on this topic.
- Private Money – Last year when I actually got licensed in my state to be able to raise private money, I was one of only two people who had gotten licensed in the last 10 years and yet there is a huge opportunity with the low returns that folks are getting on their money for real estate investors to work with private individuals with private money loans secured by investment real estate.
- Rent To Own and Lease Options (as exit strategies) – I will also be sharing some of the strategies for offering creative, flexible financing to your end buyers to make your exit strategy more profitable and give you a significant marketing advantage.
As you can see, there is quite a bit to cover on tonight’s webinar so I will be mostly pointing out specific training resources that we have already available including checklists, systems, forms, audio downloads and more. I will, technology willing, be placing the recording of the webinar up on the Real Estate Investor Wiki within a couple days.
Until my next post,
James
The following article was submitted to us for publication and the reason I am sharing it with your is that it has a very common MISCONCEPTION about owner financing. In the overwhelming majority of cases there are strategies for a motivated seller to structure the deal even without paying off their existing underlying debt. Links in the article are exclusive resources for our Real Estate Investor Bronze Members. Here’s the article:
In the current economic climate, purchasing your own home can be difficult. Many buyers would like to take advantage of the low listing prices for properties, but are unable to get financing for the purchase in a standard homeowners loan from a bank. Another option for home buyers is Owner Financing.
Owner financing, or seller financing, means that all or part of a purchase is financed by the seller. Instead of paying a mortgage company or other lender, the buyer pays the original owner. The owner is the one who finances the purchase of the home. The main problem with Owner Financing is that most sellers are not interested in pursuing this option.
A seller must pay off their original mortgage before they can sell their home. Here is an exanple: A seller lists their house for $275,000, and has $200,000 left to pay on their original mortage. If you are financing the purchase price with a bank loan, the seller uses $200,000 to pay the balance of their mortgage, and walks away with $75,000. If the seller wanted to use the option of Owner Financing, they would have to pay off the $200,000 on their own. Most sellers simply do not have this amount of money readily available. Even if the seller is able to pay any remaining mortgage balance, they would then have to wait for your monthly payments over 20 or 30 years to see any return on the property.
Owner financing can be a great option for sellers who are interested in carrying investment properties, and have both the cash and time to do so. The return on a standard owner financed home is guaranteed at whatever the interest rate of the loan is. Sellers can usually charge a higher interest rate than a bank could, because buyers purchasing their home in this way may not qualify for a bank loan. Owner Financing is an attractive deal to buyers who would otherwise not be able to afford a home, even if they end up paying more in interest over time.
It can be difficult to find owners willing to finance the purchase of their home, and even if you can, you may end up paying thousands of dollars more. If you are interested in pursuing an owner financed home purchase, you should think carefully about the possible repercussions in the long term. Once the financial impact has been reviewed and thoughtfully considered, it is entirely possible that Owner Financing is still your best option.
Many real estate investors know how to buy houses with Owner Financing. If you are interested in learning about buying, selling or renting properties using these creative strategies then check out these free resources for Real Estate Investing.
Until my next post,
James
