Picture
the scene. You've got a super motivated seller who
needs to sell their property. You've negotiated a
good discount and you've persuaded them to let you
take an option on the property.
But
there's a problem. There's a good whack of equity
in the property. What do you do? If you've got some
funds in the bank then it can be very tempting to
just pay the seller the full amount of the equity
to get them off your back. It's a good deal after
all, why not?
When
you have none of your own money in a deal, you are
by definition getting an infinite return on your money.
As soon as you put cash into the deal, you're not.
If you put a chunk of cash into the deal, then you're
not really being creative
any more. You might as well just get a mortgage and
buy it the traditional way.
You
have limited funds. Unless you're Roman Abramovich,
you're not going to be able to do this for every deal.
So don't do it for this one!
Pretend
you're skint. The only money you have is the money
that the incoming tenant buyer will put down. And
even then, you'd prefer most of that to be in your
bank account, right?
So,
what do you do? Sure, your seller would like the full
amount of their equity, but do they *need* it? You
need to ask probing questions to find out what is
the seller's goal in selling their property. What
do they need the money for? Are they emigrating to
Timbuktu, are they going to buy a houseboat, what?
You need to find out what is the minimum amount they
need in order to do that. The rest you can pay them
in instalments or when your tenant buyer mortgages
out.
You
can't just steam in there to get this info though;
you need to
1)
build
rapport with your seller and
2)
ask their permission to ask them questions about their
situation
To
give you an example from a recent deal of mine, I
established that the seller needed money to take a
training course so that he could get back to work
on the oil rigs. We agreed that I would pay him what
he needed to do that and then he would get the balance
at a later date.
So,
forget about what you have in the bank. Pretend you're
skint and you'll get a great deal every time!
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John
Wilson has been investing in the UK for 10
years and built and sold a successful letting
agency along the way. He runs www.property-investment-blueprint.com
where you can download his ebook "Three
Killer Property Investment Strategies That
Don't Require a Bank" for no cost.
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