Leveraging the Seller’s Equity
Posted by Peter Vekselman Monday, 9 July 2012 06:04 No Comments
When you are looking for creative financing solutions to investing in today’s outstanding market, you want to first think about how you can leverage the seller’s equity in the property. We all know the worst kept secret to successful real estate investing is finding a motivated seller. These sellers are everywhere today. Since you should have no trouble finding a motivated seller, it’s time to move on to the financing.
Today, investing in real estate is dominantly a buy and hold strategy. Buy at historically low prices and hold until appreciation kicks back in as it always does. This means you need to invest in a property that cash flows positive. You want your investment to provide the maximum income until you can sell at a nice profit.
Here is a creative financing method that accomplishes exactly that. You won’t find it around every corner but it can be done. There are deals being done today where the seller carries a second mortgage – lets say for five years at six percent. Typically, the buyer is required to make a monthly payment to the seller, with a balloon payment at the end. Naturally, that reduces the cash flow from the investment property.
Now think about what happens if the seller agrees to carry a second but as the buyer, you don’t make any payments during the five years before the balloon payment comes due. There are deals being made where the seller is carrying the second at below market rates and waiting for the balloon before collecting anything. In a few rare cases, they are even carrying the second without any payments or any interest at all. This can increase your cash flow from the property by a few hundred dollars every month.
Obviously, this techniques won’t work with short sales or when the seller has no equity. As an investor, it’s your task to seek out the deals that work best for you. If you want to learn more about highly creative financing methods and the best techniques for investing in today’s buyers’ market, I encourage you to contact me for more information before it’s too late.
All the Best,
PS: Private Real Estate Investment Coaching Available: