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HOW TO SELL OR OCCUPY
YOUR EMPTY HOUSES FAST
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My intention is to keep every house I buy
for at least a year or two, hopefully longer. But that does not
deter me from offering it for resale IMMEDIATELY. By offering to
sell instead of to rent, I attract a "buyer" mentality.
I buy properties creatively so that I can turn right around and
offer them FOR SALE with these marketing advantages:
#1 No money needed, or
#2 No bank qualifying owner financing, or
#3 Rent-to-own
- Classified ad #1
NO MONEY NEEDED: Owner can finance down payment
and pay all closing costs. Nice 3 bed, 2 bath, 2 car
home, views, privacy, $159,500. 24 hour recorded
message 1-888-555-1111 Box 1234
Here we are looking for a buyer to qualify
for an 80% to 97% first mortgage. Our ability to carry back a 3%
to 20% second mortgage depends on how much equity we have.
I can't see buying houses for more than 80% of what I plan to sell
it for with creative terms. There are tons of sellers willing to
take 10% below market when you show them what they'll might net
"at some uncertain date" going through an agent. Then,
getting a 10% premium from my buyer is very common since I'm
making it easy to buy.
Will it appraise? Yes. What if it doesn't? Lower your price...or
find another buyer...or keep it. Appraisals occur when someone is
getting a new bank loan. In most cases, I sell via methods #2
& #3 requiring no new loan until later.
Offering to pay the closing costs will help buyers with good
credit and income, yet no savings. This approach will cost 2%-3%
of the purchase price... but it gets my underlying loan (hard
money or loan taken subject to) paid off fast. If an underlying
lien is an owner carry back note, it's discount time!
NOTE: Be cautious about anyone taking your property off the market
with contingencies. I rarely do. Realtors can play that game. If
my buyer wants to get a new loan, we setup the purchase agreement
as a rent-to-own (with at least 3% non-refundable purchase
deposit) in case their loan is delayed. That way we both have a
dead certain move-in and rental payment start date.
Yes, my intent is to keep each house I buy for awhile, but if I
have a qualified buyer immediately willing to pay my asking price,
and I'm getting some or all my cash at closing, I'll take it.
- Classified ad #2
NO BANK QUALIFYING owner financing. Nice 3 bed, 2 bath,
2 car home, views, privacy, $159,500. 24 hour recorded
message 1-888-555-1111 Box 1234
Here we're looking for someone with money to
put down, and challenged credit is OK. I'll sell on a wraparound
if I am lucky enough to find a buyer with the 8-12% down I require
to give them ownership with extra difficulty getting the house
back if they default. I can still offer "owner
financing" via a rent-to-own if they only have 3-8% down,
thereby KEEPING the house as I intended. They will have 12 months
to close, and perhaps a right to extend another 12 months in
exchange for higher rent (10% annual increase), higher price (1/2%
a month after 12 months) and more non-refundable money down.
So I'll sell the property if someone waives a big wad of cash in
my face, but I just don't count on it. Typically I will take the
first tenant buyer who meets my minimum requirements...
- Classified ad #3
RENT-TO-OWN: Nice 3 bed, 2 bath, 2 car home, views,
privacy. Pets OK. Rent credit. $159,500. 24 hour
recorded message 1-888-555-1111 Box 1234
This ad is run in the HOMES FOR SALE
section. A tenant buyer is 500% better than a tenant. They take
care of the house. They don't call me. There's no security or pet
deposit to manage, just a non-refundable purchase deposit. They
pay on time or lose their monthly rent credit, and rent discount.
They fix up the property and enjoy the feeling of ownership,
because they're planning to buy.
But I do risk having them buy the house. My experience is only one
out of 3 will close. You can improve those odds by being pickier
than I am. Therefore, the average house may resell in 2-3 years
after 2-3 tenant buyers (thus meeting my holding period goals).
Does the tenant buyer lose out when they don't buy? Not really.
I've never kicked out a tenant buyer if they wanted more time. We
just renegotiate the terms. When they do leave it's because of a
break up, or job change, transfer, or something like that. They
may be better off waking away from a 3-5% purchase deposit after
just 1 to 2 years than if they bought the house. Compare it to the
normal 2-3% in closing costs to buy with a new loan, and then
another 6-9% in costs to resell it though an agent.
BOTTOM LINE: People want to buy, not rent. Offer flexible,
creative terms you can put in your classified ads, flyers, signs,
etc. Offering to sell to your tenants reduces your management
headaches. Collecting several purchase deposits on houses you
bought "no money down" can become a reliable INCOME
stream. For every 12 houses you buy, you may wind up selling 4,
but you'll still have a net gain of 9 properties. Over time you
can build a large portfolio. Taking a "quick turn"
marketing approach as described above will also help you CASH in
big chucks of equity to pay your expenses, and write yourself some
"5-FIGURE PAYCHECKS."
** WHAT'S A 5-FIGURE PAYCHECK? **
If you spend anytime and effort buying and selling houses as a
real estate entrepreneur, I believe you should be collecting
5-figure paychecks. The more clear you are on what that means, the
more likely you will experience this above average income. So
let's define it...
How often?
An employer usually distributes paychecks weekly, bi-monthly, or
once a month. Therefore, you'll want to pay yourself AT LEAST once
a month.
How much?
Five figures would mean $10,000 to $99,999 per paycheck. So you
want to be making AT LEAST $10,000 a month.
Full or part time?
What is great about my "quick-turn" approach to real
estate investing is that you can do it part time while you're
finishing up or continuing another career. If you work this
business persistently (even part time), creating AT LEAST a
$10,000 profit AT LEAST once per month is a realistic goal. That
might mean flipping two contracts for $5,000 each within 30 days.
Or...buying a selling one pretty house for a $20,000 profit over a
two month period.
Profit verses "Paycheck"
There is one important distinguish I'd like to make when I talk
about paying yourself 5-figures. A paycheck is normally a check
that can be cashed immediately. And estimated income taxes are
withheld. Buying and selling houses is for the purpose of making a
PROFIT. As an investor, your profit is not realized until you CASH
OUT. When you cash out, you must settle up with Uncle Sam.
Therefore, it is not always desirable to cash out unless you need
the cash.
I know many beginning investors need a fast cash fix, and that's
OK. But once you get things rolling, you may want to let you
profits stay invested with the property for 12 months or longer.
Your net profit is NOT the spread between your purchase price and
sales price. You must take into account your costs of doing
business. As a rule, I expect to pay about $5,000 in costs (or 4%
of sales price) to buy and sell a house. This includes closing
costs to buy, closing costs to sell, holding costs, buyer
incentives like rent credit, marketing, etc. I require a $20,000
minimum spread between my purchase price and what I think I can
sell the house for. With $5,000 in costs, my minimum
"paycheck" should be at least $15,000.
I usually don't take into account any positive cash flow I receive
on my properties when projecting my profit. Positive cash flows
may or may not be eaten up by unexpected expenses. My main cash
flow comes from being cashed out with new buyer financing and from
non-refundable purchase deposits.
My corporation buys and sells houses. My corporation has hired me
to run and operate it. So I receive a salary. I only take out as
much salary as I need to maintain my preferred lifestyle. Most of
the equity generated from buying and selling stays in the houses
occupied by my tenant/buyers, or in mortgage notes carried back
from buyers I helped finance.
Pulling it all together...
The bottom line: When I suggest you start collecting 5-figure
paychecks, I'm recommending you create at least $10,000 in cash or
equity each month buying houses you plan to keep awhile or flip
immediately.
Every investor needs to determine their own personal goals for
building wealth and creating regular income. These are my thoughts
and I hope they 're helpful to you in creating your own financial
and business plans. Getting advice and information from a good
real estate attorney or tax advisor is highly recommended. I have
shared sources for such advice in past issues.
** IDEAS FOR SOLVING ODOR PROBLEMS **
Especially for real estate investors, flippers and rehabbers:
http://www.odorxit.com/frames/OdorXitInvestors.html
Until next time...
May God bless you, those around you, and the United States of
America,
Richard Roop
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Bottom Line Results, Inc.
743 Gold Hill Place #239
PO Box 220
Woodland Park, CO 80866
719-687-4472 or 1-800-737-8582
719-687-4471 fax
richard@resultsquick.com
About the Author…
Richard Roop is a speaker, author and President of Bottom Line Results, Inc. located in Woodland Park, Colorado. He has been a successful marketing consultant since 1984 and today he specializes in helping entrepreneurs launch and grow their creative real estate businesses. He bought his first investment property in 1986 and became a full-time real estate investor in 1996. Today, he buys and sells 3 or 4 single family homes each month using creative financing and entrepreneurial marketing techniques. His "how to" articles and marketing pieces have been featured in various entrepreneurial, real estate and marketing newsletters. He is the author of "How to Sell Your Home in 9 Days" and "How to Collect 5-Figure Paychecks Buying & Selling Houses". He can be reached at 1-800-737-8582 or richard@resultsquick.com
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