When property investing, pay the seller their asking price but negotiate the terms under which you can buy property. Youd be absolutely surprised when property investing at how many sellers will help fund you into their property. Basically, youre receiving vendor finance from the seller.
Lets take an example of a $300,000 house. The seller wants $300,000 for their property. When property investing what most people will do is theyll negotiate all day long to get the price down from $300,000 to $270,000. Then when buyers have negotiated to get the house for $270,000 theyll get a bank loan and have the liability of a loan. Theyll get a 30 year loan and after about 5 years of making payments they will probably owe about $260,000. Instead Id like you to consider a different strategy when buying: get the seller to vendor finance you into their home.
You can say to the seller, Listen Mr. Seller, I know you really want your $300,000 but let me do this: why dont you let me make payments on your existing mortgage and in return Ill give you the $300,000 you want and Ill just pay you direct. When property investing, Ive always found that if you say to a seller, Ill give you your asking price of $300,000 if you let me make your payments on the property. You will be surprised how many sellers will let you pay them direct if youre not trying to negotiate them down on the price. This is one of my favorite ways to control property.
Now I know that if Im paying a seller direct at $300,000 at $2,000 a month, in 5 years time Ive only got a balance of $180,000 that I still owe the seller. So when the seller says to me, I will do this but youve got to pay me off in 60 months. Thats okay with me because I didnt have to qualify for a bank loan. When property investing can you see how getting finance from the vendor can be beneficial for both parties?
When property investing and getting vendor finance from the seller, you as the buyer may pay a little bit more for the house but by making payments direct you will owe the seller $180,000 in 5 years time instead of $260,000. Youve made a profit of $80,000 with out qualifying for a bank loan.
Rick Otton is the director of We Buy Houses Pty Ltd. He has been property investing full time for 14 years. Rick has completed over 351 property transactions in Australia and the United States.
Rick specialises in creating positive cash flow through a variety of strategies he perfected in the United States and adapted to Australian conditions. He sells home study courses on vendor finance, one year mentoring program as well as a yearly 3 day boot camp on the Gold Coast. Go to http://www.rickotton.com for more property investing information ring 1800 003 588 in Australia.
