There are a lot of get-rich-quick and nothing down real estate programs on the market today. Programs costing hundreds of dollars and claiming to show you how to make it big in real estate using their "proven system" …
I have seen some of these programs and without naming specific names, my personal opinion is they are over priced, over rated and cost a lot of money to tell you what you probably already know. For those of you who do not understand the real estate game, I thought I would give you this free crash course on the "secrets of investing" and the "nothing down" angle.
This is a crash course because I believe most people can understand the concept quickly without spending hundreds of dollars. If you need more information on get-rich-quick real estate programs, check your local library for older get-rich-quick books, the concepts are basically the same yesterday, today and tomorrow. The new programs just have different authors and product covers …
PREMISE # 1- DO NOT WANTERS
The whole angle to finding deals in real estate is to find sellers who do not want their properties. A do not wanter is a high motivated seller who will sell their property cheap, far below market value, to get out from under the property. Now you may ask why someone would be a "do not wanter" … There are many reasons but chief among them is:
1. The Seller inherited an out-of-town property. They do not want to pay taxes on it, they do not want to insure it, they do not want to manage it, and they just want to dump it fast. They have no blood in the deal and want to be cashed out fast, even if the property sells for substantially less than it is worth.
2. The Seller has economic and / or tax problems. The seller has to dump the property quickly for whatever reason to come up with cash. This is a desperate seller who will be very flexible on price.
3. The seller has to relocate and needs to sell the home to buy the next property and time is of the essence. These types of sellers, while motivated are not as desperate as the first two mentioned but deals can be had.
PREMISE # 2- NEGOTIATIONS
The perfect objective is to get the seller to either do a no-down payment or nearly no-down deal on a land contract. The other alternative is to have the seller carry the down payment back as a second mortgage, which you pay over time in conjuction with the first mortgage to the bank or lender. The key: No cash out of pocket. There are a number of seller motivations that can be considered in a real estate transaction as follows: (see my article on negotiations)
1. Do they want the full purchase price? Then, are down payments, interest rates, land contracts, second mortgages, etc negotiable?
2. If selling price is not critical, can you offer them a higher interest rate on a land contract or second mortgage for a reduction in price?
3. If the seller wants out of a deal for tax or income issues: Can you take over the payments and have the seller carry back a second mortgage for the balance of the spread between the selling price and the mortgage balance?
Every seller has one of three primary motives: they either want to be cashed-out, get an income stream, or a blend of both. Find out what the seller wants to achieve and work it.
You can always look at foreclosed property through sheriff sales in your area by calling your local government and asking about tax sales if that is of interests to you.
PREMISE # 3-INCOME PRODUCTION
The other and very important consideration to real estate investing is that whatever property you purchase should be income producing. The most solid revenue generating property is a rental. Whether a single family or multi family property, the key to building wealth is found in properties that generate an income stream. My personal opinion is to avoid single family units and not to rely on "flipping" to make money. A key starting property is a duplex (see my other articles for the discussion on duplexes and land contracts).
A single family residence in which you live is simply a money pit requiring you to pay the mortgage, the interest, the insurance and taxes. The only wealth from a "home" is found in appreciation. Single family units as rental units can go vacant for a long time and cost you money as well. With a multi family deal like a duplex or a fourplex, at least one unit will always be generating some cash flow. The average vacancy rates tend to be around 30% for commercial properties … or about about a third of your units will always need tenants … that is a pretty safe guesstimation for safety.
There you go … the bottom line on investing and it only required a few minutes of your time and no money, right? If you found this article useful, I strongly suggest you click the quick view link below to check out all my real estate articles.
To your success!
Copyright © 2006 James W. Hart, IV All Rights Reserved