Hi everybody. I am brand new to the real estate investment business. My million dollar question is this:
What do you say to a homeowner to pursuade them to sell you their property at a big discount? ;D
There is nothing you say. You need to build a good report with the seller, take an interest in them. It’s all about relationships. Also, the seller has to be motivated and need to sell. If the sale is not urgent than why would they take a huge discount?
Like tcwood said, you got to get to know the owners.
Find properties with the right things wrong…that very well could be the owners also. (divorce,loss of job, estate,green foot fugus, allergic to painting…whatever)
Who said you have to buy at a huge discount?
Your asking $200K for your house.
OK…I’ll buy it at FULL price.
payments as follows:
$1000 per month for 200 months. (~16.5 yrs)
I’d do those deals Everyday of the week. It just comes down to “What are they going to do with the money after they sell?” Make it attractive for them. Maybe they won’t do the full amount, find out how much they NEED and work around that.
Happy investing
Hi I’m a new investor and sorry if this is a dumb question, but if you pay full price ($1000 for 16.5 years as your example) how would you be able to make $ on it? If you try to rent it out you wont get $1000 month, if you try to flip it you’d only get max the full amount you paid minus repairs, holding costs.
Remeber that if you purchase a SF for a rental most investor will not rent out hte property for less than 1% of purchase price. this property should rent for 2k month depending on the market it is in.
On a deal where you pay “full price” in installments, you’re not actually paying full price.
If you look at the Time Value of Money TVM, you realize that you’re paying WAY less than full price because you are allowed to do it in installments.
“full price” would be a loan, at the going interest rate (maybe 6%) for that $200k, amortized over 200 months, which would be a payment of about $1584 per month.
What I would do on a deal like this is turn around and sell the house. You get almost the whole sum in cash. Couldn’t you easily take $170,000 and turn that into 6 or 8 properties that all make money? If you piss away the $170k, then you’re screwed, paying $1000 per month for the next 15 years, but if you make something out of it, it’s like a “zero percent” loan for $200k. Wow!
Also keep in mind, that when you make your last payment of $1000, that $1000 (15 years later) is only worth 60% of the first $1000 payment (inflation), so if you actually do a TVM calculation, your $1000/mo for 200 months is equivalent to paying more like $150k for the home in “todays dollars”, or less, depending on the amount of money you can make by actively using the cash generated.
The only hitch is that the homeowner cannot pay off their mortgage with your payments, so it would only work for someone who owned (or was very close to owning) the home free and clear.
Eric
islander, in most “big city” markets, your rent calculation is way off.
Here in Denver (we have average valuation, nowhere near coastal areas), a $200,000 home rents for about $1350/mo.
But still, that’s is less than the $1000/mo payment, so renting the home would work too. 
I didn’t even address that in my previous post.
Stew
“full price” would be a loan, at the going interest rate (maybe 6%) for that $200k, amortized over 200 months, which would be a payment of about $1584 per month.
This tells the story right here: IF you can’t get at least 1% rents…you’d pass it up. But in my senerio, you have an 0% loan. Look very close at numbers.
Then…sell it CFD (contract for deed).
IF they have GREAT credit you can do the above 6% and make $584 a month. But what about the people who have questionable? 9-11%? Run those numbers…woohoo. *you also save them bank qualifying, and have a larger pool of buyers this way.
Best of luck, happy investing.
Dave
Stew is right on!
Buying a property at a huge discount is generally based on two things;
Motivation and Situation
Why are the owners selling and what is their situation.
The more urgent they are, the greater the discount.
However, it’s not what you buy the house for (to a certain extent) as much as how much monthly and long term profit there is in the deal.
The point Stew was bringing up is very valid and many times missed by newbies; don’t sweat the total sale price as much as “how” you pay.
I will sign a contract to pay $500k for a home valued at $200k as long as the appreciation in the area takes me a minimum of 20% above my payoff at time of payoff and the monthly cash flow is there. I know this is kind of a crazy example, but I would buy a house a day like this if they were out there.
Ge Get’em!
Ray Rochefort, mgr. mem.
Purpose Investments LLC
Hello, I am a newbie…also ;D. What does the abbreviation ARV mean and LTV?
ARV - After Repair Value
LTV - Loan to Value; the percentage of the property’s value the lender will extend to you in a mortgage.