JP Morgan, an original Robber Baron and one of the richest men of his time said it best. “The time to buy is when there is blood running through the streets!” While the blood is not running through the streets yet, it is trickling!
- Housing appreciation is flat or even negative in some formerly hot areas
- Time on market, the amount of time it takes for a property to sell is increasing dramatically across the country.
- Inventories of unsold homes are up 30-50% nationally
- Developers and builders are offering deals unheard of 1 year ago
Also, historically, more mortgages go into foreclosure at 3-5 years after origination than in any other period of their terms. More than ½ of all mortgages in the US were taken out in the last 3-5 years. Another negative factor is that, according to one study, almost 50% of all homeowners have less than 25% equity in their homes.
This has come about because of the large numbers of home buyers that put zero down when they purchased and the fact that homeowners pulled out $333 Billion in cash with refinances in the last 3 years. If someone, particularly an investor, (nearly 25% of all purchases were investors over the last 3 years!) can no longer afford their mortgage payments and they have little or no equity, they will not have much incentive to try to hold on, meaning foreclosures will soon spike. Many, many people will be trapped in their homes by the foregoing circumstances. They will not be able to sell:
- Real estate agents will not list their properties if they have little or no equity as they see no means of collecting their fee
- They will not be able to reduce their selling prices without having to bring cash to the closing to pay closing costs, cash they probably don’t have.
- The market will be cluttered with similar properties for sale
- Investors will not be interested in their properties because there is no equity
First, you sell the property! You line up Motivated Buyers as your potential clients.
Then, you find a Motivated Seller and acquire his property Next, you put the Motivated Buyer into the property as the new owner with a private, seller financed mortgage.
Lastly, you collect Automatic Income for the next 5-10-20 years or more while your buyer handles all the maintenance and other duties any home owner is faced with OK, what is a Motivated Buyer and how do you find them? A Motivated Buyer is someone who can not or will not pass the bank’s scrutiny to qualify for a mortgage. These may be owners of small businesses, especially if they are cash based. They could be self employed professionals or even foreigners. They could also be people with really stinky credit! These people will jump at the chance to buy a property with private, non-bank financing and will pay you a premium for the opportunity. To find them, you simply run an ad highlighting private, seller financing. Something like:
Owe too Much to Sell Your Home?
Investor can help! XXX-XXXX
You won’t need money to acquire these homes in most cases! Have a lawyer or a person experienced with land trusts, set one up for you. This is the secret that makes this strategy work. The land trust will allow you to take over the property and sell it without paying off the seller’s mortgage!
You tack on a profit for yourself and this total becomes the Motivated Buyer’s new mortgage, less the 5-10% cash down payment you require upfront on the new purchase price. Your buyer moves in and makes payments to you until he pays your mortgage off. You take his payment and pay the seller’s original mortgage. You pocket the difference. Let’s look at the potential.
You pick up and sell 1 property per month after a 2 month learning curve. The properties average $250,000 each in market value. They produce $300 per month in positive cash flowYou receive $10,000 cash down payment from each one With 10 of these, you have:
An income of $3,000 per month, or $36,000 per year. You received $100,000 in cash down payments$2,500,000 in assets, with equity accruing monthly as the mortgages are paid off Could you Quit the Rat Race with $130,000 per year? No? Repeat the above!
Copyright 2006 Bill Young. Bill is an experienced real estate investor and personal financial consultant. He writes and lectures on advanced real estate concepts and is an expert on the formation and use of land trusts. He can be reached at 877-291-3542. His web site is http://MotivatedSellersOnline.com/SellforMore