Cash In Your Pocket Plus Cash Flow

by Alex Gurevich, TX

You'll always make money when you are buying a property cheap, cheap, cheap. Depending on the economy, it may not be as easy as it sounds, especially in the beginning. For example, out of about a dozen properties I bought this year only one was a true bargain, 40 cents on the dollar. Same last year. The rest of them are properties purchased at relatively small discount 10-20% but on excellent terms, no money out of pocket, taking over existing loans with low interest and low payments.

I'd like to turn in a bit of a practical advice.

Here's a profitable technique with plenty of private money easily available to finance it. This will put some cash in your pocket and create a nice monthly cash flow too.

In the older areas, there are lots of homes that are paid for. Some of them have been on the market for a while. Get several signs in those areas and you'll hear from some of those homeowners frustrated with their realtors. On a house listed with a realtor say for $80K, some owner will be interested in accepting about $65-67K without commissions, FHA and other closing costs, etc. Offer them 1/2 cash now and 1/2 half cash later, when your buyer qualifies for new 3rd party financing (3-5-7 years). No payments and/or interest on seller's 2nd mortgage.

Now, advertise in your newspaper's financial section for $40K First private loan at 15%, 5 years, 50% Loan to Value. You WILL get calls. At closing you will pocket about $4-5K after closing costs. Your monthly payments interest only on $40K will be $500. Sell the property for $82.5K with $2.5K down, owner financed contract for deed at 10.5% for 4.5 years. You'll collect another $2.5K cash plus incoming payments. Principal and interest will be $731. That's $231 cash flow for the next 5 years.

Offering a price close to what the seller would net if (s)he were to pay commissions and closing costs and negotiating favorable terms is not as hard as trying to go for a kill on the price. In this example, it's highly unlikely that you could get this property for $40K cash outright. But the seller might be in the position to get $33K cash now and wait for a few years for another 30K from you.

All you have to do is ask.