They bought my rehabbed home, when the buyer had 1000's of bank owned homes to choose from!
Because we offered seller financing, a Land Contract, when the banks and mortgage companies aren't coming through for the buyers!
Risky, you may say? Not when we look at the alternatives.
Risky; is sitting on a vacant home, waiting for a buyer to get qualified, with lenders who have tougher guidelines to fulfill, in a tough market.
Sure we would have like to cash out, and we tried to cash out for six weeks. Cash buyers were offering $30,000.00 below the sales price we got. Once we offered seller financing, the game changes dramatically.
This is not new ground for me and the serious real estate investors who've been around for a while. In the 1980's and prior, Land Contracts were very common. One out of seven land contracts failed, I lost 6 months of payments, but then I got the house back to resell.
Thus, a failed land contract is still a winner.
Reduce the Risk with in many ways:
-- If poor credit -- Get more down payment,
-- No money and poor credit -- Use a Rent-To-Own method,
-- Excellent credit -- Offer less down and easy-in (easy purchase terms),
-- Buy on land contract -- offer seller financing to your buyer,
-- Diversify -- Flip some, Rent some, and offer seller financing on some,
-- Get Co-Signers and family participation for down payments from buyers, etc...
Be creative with terms. With seller financing; anything can be worked out, and the mortgage lenders are not involved with all their pages of legalities nobody can understand at the closing table.
Seller financing is just one of the many ways (multiple streams of income) a rehabber can enjoy. Use the variety of strategies available to us that give us leverage both when buying and selling.
Seller financing when we're selling on a contract for deed adds additional income opportunities with higher interest rates than a CD, a higher sales price, and still an equity position that we can borrow against (although I don't recommend it), plus we decide the term of the contract.
A "Balloon Payment", or payment in full in a specified agreed upon date (by both seller and buyer) can be written into the contract where the buyer has to refinance to pay the seller in full. This gives the buyer time to improve their financial situation to get new financing if you don't want to carry the contract full term (for 10 to 25 years).
The advantage with seller financing when you're the seller, you make more money from the same property after the sale. Like a rental, it keeps on paying!
No closing Costs
No closing costs is a myth! There are always closing cost.
If the seller pays your closing cost for you, than there are no closing cost to you in that particular transaction. You may do the same for your buyer when you're selling. The illusion is that the cost are generally tacked on the sale price of the property.
With seller financing, the closing cost are reduced by the amount of the mortgage fees. I've seen great mortgage closing cost rates as low as $500.00 regardless of the amount of the mortgage... up the rip-off mortgage fee of 6%.
Do the math - - - At 6% on a $100,000.00 property, the mortgage cost would be $6000.00.
Other closing cost include pro-rated property taxes, paid up insurance policies, transfer taxes on the deed, Title insurance costs, and any escrows for unpaid and pro-rated utilities.
So there are closing costs involved... It's just a matter of negotiation of who pays them!
No Down Payment
When you are the seller financing the buyer, you can offer no down payment terms for a lighting fast sale.
As a rehabber, the worst thing that can happen (in my opinion) is not having a project to work on. There was one deal I listed with a Realtor for 6-months with "NO-SALE". After the listing was expired, I listed the property for sale by owner (FSBO) offering Land Contract Terms and NO DOWN PAYMENT... And the buyer showed up in two weeks and we closed a week later. I GOT MY PRICE AND THEY GOT THEIR TERMS. I held the contract for 5 years and they paid off the balance owed.
No down payment and creative seller financing is only limited to your financial position.
Advanced rehabbers and real estate investors know what I'm talking about.
If your new to this business strengthen your cash position with fix and flip or wholesale deals until you begin to build up your equity and assets.
Definitely advertize that you are a buyer looking for a no down payment and or seller financing deals in your local news and Internet advertising sites like www.craigslist.com
A rehabber in some rare cases can find a seller willing to lease their property with the option to buy without offering seller financing.
The strategy here is to take the property on a lease, rehab or remodel lightly (limited fix-up investment) to bring the property up to code to qualify for refinancing or find a buyer within your option period and sell your option to the new buyer (note: the rules have changed for double closings - check with your mortgage lender).
As long as the profits are fair and reasonable to reflect the completed remodeling including labor there is a way to work out the terms...
The benefit for the rehabber is doing what we like to do, with creative terms, and collecting scale wages and profit to reflect the higher sales price... That's very fair and a WIN / WIN for all involved.
Offer To Buy
For as long as I've been in the business, the rule is, "your profit is made within your offer to buy".
Whether your buying with seller financing or offering cash out to your buyer and everything in between; BUYING LOW AND SELLING HIGH is the name of the game.
Just like any business, we get better as we go, and we can grow as big as we like... What ever fits your lifestyle.
Your offer to buy is directly reflected on how well you know your market. If your working locally as a rehabber in your neighborhood, than it doesn't take long to get a grasp on what homes are selling for in your area, and what the going rental rates are.
This is the home work for every business owner and investor. KNOW YOUR LOCAL MARKET!
We should all, at the very least, know what houses on our street are going for and the nearby streets. With a little socializing with the neighbors we find out who is working where and if anybody knows of anyone looking to buy a home in our areas.
Getting to know the local Business Owners, Realtors, Bankers, and Insurance Agents to name a few will give you plenty of information to keep working as a rehabber in your own town for decades.
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