The biggest mistake you can make in this time of this “late recession” (in some areas already “post-recession”) is to assume that all of the sellers out there are over-leveraged and that the ONLY way to make money is to work short sales. That is a HUGE mistake!
While there is a lot of money to be made in short sales (and you need to know how to do them), most short sales are very time consuming and are not the most profitable way of investing in real estate.
In order to maximize the profitability of the short sale component of our business, we have identified a small niche in the short sale business that consistently delivers high profits with a drastically reduced cost and time involvement. (You will be very excited once you learn that in an upcoming webinar. It will make a lot of sense to you.)
What is working now–in this economy?
Now, you may be curious about other parts of my real estate business… What makes a lot of money for me and my students in this economy, besides short sales?
The answer is to work with houses with equity, whether in foreclosure or not. Now you may be thinking that there are no houses with equity where you live, but that is WRONG.
The fact is that the majority of people you get on your foreclosure list and who are in default on their loans are over-leveraged. However, the statistics also show that 1 in 3 houses in the United States is owned free & clear.
So, on one side you have over-leveraged houses, while on the other side you have houses with a lot of equity. There are a lot of opportunities on each side of the spectrum, as well as everywhere in between.
For the purpose of this article, let’s discuss one segment of sellers out there who have 15% to 20% of equity, are NOT in foreclosure, but they have to sell quickly due to some other motivation (illness, divorce, job transfer, etc.). Those sellers are motivated but not behind on payments.
Since the market, in most of the areas of the country is not a “sellers” market, and houses are not moving in a week, these motivated sellers can’t wait, and they need YOU to help them.
So, how do I get paid to buy their house?
If you sit down with such a seller, and educate them on the cost of selling using traditional methods, you will demonstrate to them the fact that they will need to come out of their pocket to sell the property. It is pretty simple to show that the cost of selling using a Realtor will exceed 12% or more (commission, closing cost, monthly payments until they find the buyer and close, maintenance, etc.).
We use our proprietary “P-E-N” method (Presentation-Education-Negotiation) to bring seller down anywhere between 15% to 20%. If they don’t have enough equity to cover that, it is very simple for them to realize that they will need to write the check at closing.
At that point, using very precise language you can get them to understand that writing a check for the difference to you is way better than waiting for a buyer and writing the same (or bigger) check at a later time. And many of these sellers will agree–if you know what to say.
Now, this will not work with every seller, and it will not work with a seller in foreclosure. (They have no money to write you a check.) However, it works with a lot of sellers out there, and you end up making money when you buy (the seller pays you!), plus you bought the house at least 20% below market and will make a nice profit when you sell.
All of that was done without using your money or credit, and the best yet, you are dealing with only nice houses. In Part 2 of this article, we will discuss an actual case study of the “How to Get Paid to Buy” type of deal.
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