Real Estate Investing Facts

There are many people who have been caught up in the latest round of buying brand new off the plan inner city units. As many of you know, for a couple of years I have been saying this is a recipe for disaster.

Why? The investment fundamentals are not in place. Which reminds me of a similar situation, the savings and loan crisis, that I saw unfold in the late 1980′s and early 1990′s while I was living in Dallas, Texas.

At that time, many people were ‘upside down’ in their mortgages. This means that when you sell your property you have to bring YOUR OWN CASH to the settlement table in order to meet your debt obligation to your bank.

Instead of making money on your investment property, you lose money. And I know for a fact it’s happening right now-most recently a good friend of mine had to bring money to the settlement table in Sydney when he sold his brand new inner city off the plan unit.

Rea estate investing with Rick Otton in the United Kingdom.

It is possible to turn your negatively geared property into cash flow positive property. But first, you need to be aware why mass produced units can lose their resale value.

One Important Point Many Investors Forget When Buying

Buyers don’t realize how important it is for a new unit to have a point of difference. This means that physically it is different from the other units in the building. A unit may have a view, or may be located in an exclusive suburb or in a small boutique building with unique floor plans and fit outs etc. No matter what the developers say, unless a unit has a point of difference, it can damage the future resale value.

You may have seen these new units change the Melbourne and Sydney sky line. They look like identical boxes. Inside they have similar fittings multiplied over and over again in each building.

So from outside appearance if these units look the same, what happens when vendors go to sell? If a vendor accepts a lower than market price for any reason that will start a chain reaction, so if a unit for sale doesn’t hold its price it will bring down the value of the other units in the building. Even if these units are not for sale.

Most people find this very frustrating because they believe they have no control over what motivates people to sell. Your next door neighbour’s motivation to sell may be very different from yours.

Perhaps they have a sick child and the only way they can afford medical treatment is to sell their property fast. They will accept a lower price.

Yet you’re in a similar unit in the same building and you’re selling to get top dollar. If you are selling at the same time, you may not get the price you want.

But, what if as the vendor, you could create your own point of difference that is unrelated to the physical structure or building location?

Property Made Easy To Buy Is Easy To Sell

That point of difference that you can create is to use vendor financing. When you go to sell your unit, offer vendor terms to the buyer. You, as the vendor, offer finance to the buyer.

Here are two important reasons why both the seller and buyer each benefit from vendor terms:

The seller can achieve their price.

The buyer has the opportunity of home ownership.

The seller is happy because they will be covering their mortgage payment and property outgoings. Instead of looking for money every month to pay expenses, the seller’s is making positive cash flow.

The buyer is happy because they have the opportunity of home ownership. They may have been locked out of the banking system or unable to buy because their deposit wasn’t large enough.

To find out more information on how you can build your own positive cash flow system, simply click the link below.

You can be reading your first FREE issue of the “Positive Cash Flow E-Course” in the next few minutes. By clicking on Rick Otton the author of this article.

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