Over the weekend I attended a property seminar where by I discovered another investor using a technique I have been pondering on how to execute. How on earth do you convince someone to give you their house so that you can add value to it with out ever actually buying it. Well now I know how to do it.
Everyone sells their house for a reason – usually money – but it is the reason they need the money that they are selling. By finding out this reason you can tailor make your offer to suit their needs. For example if they were selling simply because they needed $10 000, then you could quite easily give them a $10 000 deposit to secure the “option” on the property with the rest to be paid by a certain date.
So lets look at an example…
Mrs Smith needs to sell because she needs $10 000 to pay debt incurred from credit cards. Her house is worth $350 000. If she was to go through a real estate agent her costs would be $12 250 agents fees, $1000 legals, potential holding costs of up to $10 000 meaning her pay out would only be $326 750.
Lets say you come along, you agree to buy the house for $340 000. You give her a $10 000 deposit and agree to pay her the out standing amount in 12 months time. You take over her mortgage (if she has one) you then renovate the property (as per the recommended renovation strategy this will add 135% value) so the new value is $459000, you sell it on the open market, pay Mrs Smith her $330 000 and you take a nice profit of $34 000. Not bad for a house you never even owned in the first place.Not to mention Mrs Smith received $14 000 more than she would have if she had of gone through an agent.
The thing I love most about property is that it is a win win situation for all parties involved. By being a little bit creative, you can do deals that help vendors out of sticky situations and increase your own profits.