If doesn’t matter what price a seller with a free and clear house wants. I can always pay it. The only question is WHEN. The longer they can wait, the more I can pay. The benefits of creating an owner carryback note at 0% interest include:
* You can offer a higher purchase price and get more of your offers accepted by having the seller wait for part or all of their equity.
* You can create a lump sum balloon payment due in several years and collect all the cash flow from the property during that term.
* You can give all the net positive cash flow to the seller to rapidly pay off the principle balance due and build huge equity positions without ever relying on appreciation.
* If the seller ever wants to be paid off early you can discount their note at a guaranteed 35%+ annual return, or move their mortgage to another property.
Follow these steps to make offers on free and clear houses:
1) Determine what price you expect to get quickly offering flexible owner financing to a buyer
2) Determine the minimum monthly income you can get each month
3) Determine the minimum profit you want make
4) Add up your projected costs for marketing, buying, funding and selling
5) Add up your projected costs for repairs and holding until occupied
6) Decide if you are going to pull out some extra cash when buying
7) Determine how much cash you need to raise to fund the deal
8) Determine the monthly cost of raising these funds on a private investor first mortgage
9) Determine the net positive cash flow (without offering monthly payments to the seller on a second mortgage)
Your maximum allowable offer (MAO) on a free and clear deal equals:
- Your resale price, less your target profit, less all your cost to buy, hold and sell, then
- For the term of your seller carry back note – add the total positive cash flow then
- For the term of your seller carry back note – add the total principal reduction
If you do not offer more than this final number, then you’ll meet your target profit goal.
The beauty of this investing approach is that you structure 0% seller financing with the homeowner. And there so many different reasons why sellers are accepting offers with no interest on their equity.
Many investors don’t think sellers will accept 0% financing, or wait 5 to 15 years for their money… but they do… and they do it all the time. But only when you ask.
The benefits for you are awesome.
- You can collect all the positive cash flow on the property when the seller accepts no payments. If you could net $1,000 a month for 84 months, would that be worth getting involved?
- You can make any property cash flow by only offering the seller payments based on what the houses can afford. Any monthly payments you do make are principal only and will rapidly pay off the house… creating a huge backend. If you could buy a house with no money down, get at least a breakeven cash flow, and then collect $50,000 or $100,000 within 3 to 10 years, would that be a deal?
- And if you like, you can pull most of your profit out in advance… in cash… on the day you buy it. There’s no rush to quick-turn these properties when you have no money tied up in the deal and you’ve collected an extra $10,000 or $30,000 in cash on the day you bought it.
It may seem complicated, but it is not. The marketing is easy. Prescreening these leads is simple (Hint: if there’s a lot of equity… go see the seller!). Negotiating and deal structuring is systematic. The deals you buy using this investing model are super easy to quickly resale or occupy.
Use the steps above to structure multiple offers and then recalculate different offers based on:
1) Having the seller wait for ALL their equity,
2) Giving the seller the net cash flow each month,
3) Giving the seller a down payment and
4) Some combination of cash now, cash flow and cash later to the seller
For more FREE information about Free and Clear Cash Flow Investing visit
www.free-and-clear-cash-machine.com
July 16th, 2009 at 4:54 pm
this is really works!