CREATIVE REAL ESTATE STRATEGIES FOR SELLING PROPERTIES AT FULL PRICE LEX LEVINRAD
The key is to have potential buyers that are looking
Let’s say that you borrow $65,000 from a private
for seller financing opportunities before you
lender for the purchase and rehab of the property.
purchase the house. I find that one of the best
You agree to pay 10% interest to the lender, which
ways to do this is to advertise my existing rental
is $541.66 per month (interest only). Then you find
properties as rent to own homes with seller
a potential buyer to pay $100,000 for the property.
financing available. Doing this attracts other
The buyer gives you a $20,000 down payment,
potential buyers that I can store in my database.
which you get to keep. You give them a mortgage
When I am thinking of purchasing a house, I can
for the $80,000 balance. Assume that you charge
have these potential buyers go by the house
your new buyer 9.75% interest. Their monthly
before I purchase it and if they like it, then they can
payment would be $650. Every time your buyer
give me a deposit to secure the house. Many of
pays you $650, you would in turn pay your private
the rent to own buyers can become seller financing
lender the $541.66. Keep in mind that you are still
opportunities down the road when they want to
responsible for making the payment to your lender,
exercise their lease option, if they cannot get
even if your buyer misses their payments. If your
approved for a conventional mortgage.
buyer defaults and stops making payments, you
would be able to get your property back by suing
If you use borrowed money from a private lender to
the buyer via the foreclosure process. However,
purchase houses, then you will need the approval
you will need to continue to make all of the
of the lender to do a “wraparound mortgage” more
payments to your lender, while you are waiting to
commonly known as a “wrap”. You need to make
get your property back. This could take some time.
sure that your existing mortgage does not have a
due on sale clause. If you have a private lender,
In the above strategy, there is no appraisal
you should first check with them to see if they are
required, so the deciding factor to most buyers is
willing to let you do a wraparound mortgage. A
not the purchase price but the monthly payment. You
wraparound mortgage works like this:
could just as well sell the house
for $110,000 or even $120,000.
Selling the house for $20,000
more makes the payment go up
by only $162.50. The buyer’s
payment would now be $812.50
instead
of
$650.00.
Compare
those payments to current market
rents of $1,250 for the same
house and you can see that it’s a
good deal for the buyer, since the
monthly payment is less than if
they rented it.