I am well known for saying:
I don’t buy properties, I buy problems - I acquire the properties since they are attached to the problems. I solve the problem and make money. Problems may be with the owner(s) personally, the property itself, or the title to the property. With this win-win attitude you will succeed much more than the person who is only looking out for himself.
Thinking creatively in these situations is essential.
Realize that
No Money Down might not mean
No Money Down but
None of YOUR Money Down. In other words, put someone else’s money down for your real estate acquisition. Use "OPM" (Other People’s Money).
Learn how to balance price and terms when negotiating a purchase or a sale. If you are buying and the seller is firm on his PRICE then negotiation must be under the Buyer’s TERMS. If the seller does not want to entertain creative terms, then he must move on the price. Take a look at the following examples:
1. The seller is stuck on a $200,000 sale price.
- Lender loans $170,000 for new first mortgage.
- Seller holds $20,000 in a second mortgage (terms)
- You put down $10,000 cash
2. Three siblings have inherited a free and clear property and they do not get along. They are demanding $50,000 cash each, bringing the sale price to $150,000 FIRM! With repairs, the house will be worth $200,000.
Repairs needed:
Roof $15,000
Windows $5,000
Paint $5,000TOTAL $25,000
Estate Appraisal is $135,000
What questions should I ask?
I ask the brother who is handling the transaction what he and his siblings are going to use the money for.
- He says that he is going to have an $80,000 addition put on his own personal house and has $30,000 in the bank but needs $50,000 from the sale to avoid having any loans associated with the addition.
- His brother wants to buy a new Porsche for $45,000. He is just going to blow the money all at once!
- Their Sister has some credit problems and owes about $41,000 in credit cards She is planning to use the money to get out of debt.
How can we make it work?
- On his behalf, use your negotiation skills with his contractor who will be building the addition. Possibly supply materials for the contractor bought on your credit card or credit line. Possible result: $13,000 saved.
- For his brother, use your negotiation skills with the auto dealer to get a lower price, and possibly finance the new Porsche with your good credit. Possible result: $7,000 saved.
- For his sister, negotiate with the credit card companies or work with a credit counseling company. Possible result: $22,000 saved.
- The total of these is a possible result of saving up to $42k cash.
They can hold three separate mortgages for $36,000 each. Then, your payoff is the amounts you have successfully negotiated. You then apply to a traditional lender to refinance the lower mortgage balances totaling $108,000.
That’s a good deal! Here’s a better deal: The sellers jointly hold one single mortgage for the entire amount of $108,000. You reduce the payoff of the mortgage the same way mentioned above. Then sometime in the future, you tell them that you are coming into some money within the next month. If they can agree to take $80,000 for the balance, you tell then that you will have all their cash within that month. If not, they have to wait out the terms of the mortgage, which you negotiated to be the longest time possible. This saves you another $28,000. I have used this method many times. Total savings on this deal $70,000.00! That’s a 40% savings!
