Everyone knows that so-called fixer-uppers can generally be bought at below market prices. That's the good news. The bad news is that even buying a fixer requires cash, which many beginning investors simply don't have.
One solution is to use a lease option to get into a fixer, make monthly cash payments while you're doing repairs on the property, and then sell the property to a new buyer at a profit before the lease option period has expired. It's usually worthwhile to try to tie up the property for at least six to nine months, to give yourself or your subcontractors ample opportunity to complete the repairs and then for a buyer to purchase and close on the property before your option is up.
If the house is so dilapidated as to be uninhabitable, consider offering the owner a reduced rent, but insist that all of the rent be applied to the purchase price at closing. This is a great way to acquire a substantial equity position in the property without having to put much money down in the beginning. That also allows you to take your investment money and use it for repairs.
An offshoot of this strategy would be to find a person who is handy with tools to rent the house with the intention of buying at the end of the option period. Each contract will be different, but you could offer 100 percent of their rent to go toward their down payment, especially if you're getting that arrangement on the underlying lease.
Selling this concept to the seller is often much easier than you might expect. After all, you're going to be fixing up the property substantially, in hopes of recouping your investment and a healthy profit. If you don't accomplish that, what's the worst thing that could happen, from the seller's perspective? They get the property back, with at least some, and possibly a considerable amount of the necessary repairs and upgrades done, thus increasing the value and desirability of the property!
So if you have big ideas about becoming a real estate investor, but find yourself short on the cash to get started, one excellent way might be to consider finding a fixer-upper and then offering the seller a lease option contract. It could turn out to be a win-win for everyone. The sellers get their money, the buyer gets a nicely revamped house, and you get to pocket a substantial profit, without having had to put up a significant amount of money!
Copyright © 2006 Jeanette J. Fisher
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