As we covered in How to Get Paid to Buy a Great Deal (Part 1), there are a lot of opportunities in this current economy in addition to working with foreclosure deals.
In the previous article, we covered the type of sellers that will pay you to buy and the circumstances making it logical for them to do so.
You should remember that: No one will do something unless they get something in return that they want more.
So a motivated seller who is writing you a check to “take his house” from him at below its market value is not crazy–but smart to realize that it is better to trade the equity and cash for something he wants more (i.e. peace of mind, that new job he is moving to, that divorce he wants finalized but the house is holding him, etc.)
Can you really get paid to buy a house?
In my over a decade long career, I have gotten numerous sellers to write me a check to buy their house at prices that were way below market at the time.
Just a side note: I hope you realize that getting a seller to make another two or three payments after the closing is pretty much a norm (unless they are in foreclosure and can’t come up with money).
Once an out-of-town seller offered to pay me $100,000 to take over his three houses. In that particular case, I refused it because–even then–I would be buying those houses for more than 80% of their current value, so it didn’t make any sense.
The typical scenario where you may want to get a seller to pay you to take over his house “subject to” the existing financing is when some or all of the following conditions exist:
The house has 10% – 20% in equity and is in great shape
The seller has money to pay you 5% – 10% for doing it
Your total purchase price will not exceed 80% of the property value
The loan on the property has a great interest rate allowing you any selling strategy you see as the most profitable (owner financing like “wrap mortgage” or an AITD (all inclusive trust deed), lease option, outright sale, or even keeping it as a rental)
Now, some of you may think that a scenario and a deal as described are only possible for a more experienced investor. The fact is that those deals are pretty simple to do once you understand them, and many of my students are doing them as their first or second deal.
Here’s one of the examples:
My student markets to an “Expired Listings” list that he received from a friendly agent he networks with. (It took him less than 10 minutes to get his mailings out using the automation tool we developed.)
Within the first five calls, he got a seller who was really motivated. After the initial phone pre-screening, my student got the following facts:
Fair market value = $190,000
Owed on the property = $180,000
Motivation = HIGH (divorce)
After briefly advising the student on some of the finer points in the “getting paid to buy” strategy, the student was able to get the seller to write him a check for $35,000 at the closing.
The total purchase price for the student was then $145,000 ($180,000 – $35,000)–which was at 76% of the fair market value. (The house needed no repairs.) You’d agree that buying a property at 76% without using any of your money or credit and without doing any repairs is a “beautiful thing”!
And now for the results…
The student got the deed and continued to make payments on the seller’s existing low-interest loan for another month until he found a buyer. The buyer had $10,000 for a down payment and decent credit, so the student constructed the owner financing sale at the full price using an all-inclusive trust deed.
The total profit my student realized:
Up-front profit: $35,000 + $10,000 – $1,250 (one payment)
Monthly cash flow: $450
Back-end profit: ~ $10,000 (when the buyer refinances)
[NOTE: If the buyer defaults, my student will make MORE money!]
Question is–would you mind making $45,000 in the next few weeks? The “great recession” was a “perfect storm,” and the opportunities are endless! Do not miss them.
I will discuss more on this strategy and show you more details about this deal in my upcoming webinar, so don’t miss it!
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