Real Estate Investing Facts

Once again the information that Aiden Win supplies in this post is outstanding. The information is second to none.

If you stay up past midnight and leave the T.V. on, you’re certain to be faced with some old real estate investing “guru” telling you:

“Yes! You too can buy real estate with no money down. You don’t even have to use your own credit – just become the owner of real estate and watch the profits roll in!”

(Find Great Canadian Deals)

The fact is that it’s not quite that simple, but it’s not particularly difficult.

The basic idea is this: There are 2 ways to buy property:

“Cash” and “Terms”…

A “cash” deal happens when you put up all of the money to buy a property without getting a loan or any financial assistance of any type

A “terms” deal happens when you do anything other than paying cash in full for a property

Of course, it’s possible to do a mix of the two, and most people do exactly that. For example, the standard residential real estate transaction these days involves a buyer who puts up a down payment of 10% to 20%, and then secures a mortgage loan for the remainder.

The important thing for you to get in mind is this:

“Virtually Everybody Buys Real Estate On Terms Rather Than For Cash” How many people do you know who put up the cash to buy their home in full? Not many, I’m guessing. And unless a person pays cash in full, they’re buying on terms – terms dictated by their mortgage lender.

So if virtually everyone buys real estate on terms rather than for cash, where does the advantage exist for real estate investors who do this?

That’s a great question, and the answer is this:

In general, real estate investors who buy on terms have greater flexibility in one or more of these areas:

Interest Rate:

Any half-competent investor can frequently arrange for below-market interest rates – sometimes even creating Zero-Interest loans!

Length of Repayment:

Sometimes it’s useful for a loan to extend into the future for 5 years. Sometimes 30 years is better. A well-trained investor knows what works best for him or her and creates terms accordingly.

Credit Applications:

Quite frequently, an investor will establish a transaction in such a way that the investor him/herself will not need to use his credit at all – and probably not even complete a loan application.

But why do investors have greater flexibility in these areas? The answer is that, in general, investors are able to arrange the terms of their purchase of real estate directly with the owner of the real estate rather than with mortgage lenders. And almost without exception, this leads to easier deals and more favorable terms.

Here’s An Example:

A friend told me that a neighbor of his recently moved out of her house and into a new house. It’s been a couple of months, and the neighbor’s first house hasn’t sold yet. The neighbor is beginning to get nervous about having two mortgage payments, and told my friend that she would probably be willing to let somebody just take over her payments instead of paying her cash in full. And the person who does this (probably me) will become the owner of that home without having to apply for a mortgage or even getting a credit report.

(The strategy that allows an investor to take over mortgage
payments on someone else’s loan is called “Buying Property
Subject-To The Existing Loan”)

Example #2:

An older couple owns their home free and clear. They want to sell the house, but their real concern is to use the money from the sale of their home to create an income stream for their retirement. That’s when you show up, and offer to buy their home if the owners will let you pay them in the form of a loan instead of as a cash transaction.

You might agree to pay a reasonable price for the house along with an annual interest rate of 6% paid against the unpaid balance.

The advantages for the seller are (1) they sell their house at a reasonable price and (2) they create an income stream at an interest rate roughly 2 or 3 times what they could get from a certificate of deposit. And the advantages for you are that (1) you, too, get a good price for the house and (2) there’s no need for you to apply for a mortgage with a traditional lender, so your credit isn’t an issue.

“Terms Can Be More Important Than Price”

In a previous lesson, I gave you an example in which it was far LESS expensive to pay a HIGHER price with better terms than to pay a LOWER price with less favorable terms.

This difference can’t be ignored – and will frequently give you a huge competitive advantage over your competitors.

In fact, in future posts, I’m going to share some of my
Power-Strategies for using creative strategies as a huge competitive advantage, so stay tuned!

Aiden Win

Mr. Foreclosure

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Tags: buy property, buy real estate, Real Estate Buying Strategies, real estate investors