If you are looking for bigger pockets RIGHT NOW, your concentration should be focused on wholesaling real estate deals to buyers who are looking to occupy the property, and helping them secure the financing needed to make to deal happen.
If you haven’t become best friends with a mortgage broker then your business may be suffering. In my opinion, Mortgage Brokers play the single most important position on the field of real estate investing. I am pretty sure most of you investors have very reliable brokers in place to handle your acquisition needs; but what about the needs of your owner occupant buyers. Become the one-stop shop for buyers and allow your earnings to run on cruise control.
The ideal scenario is to acquire a property via contract for 50 to 60 cents on the dollar and AS-IS, of course. Have your mortgage broker procure a 100% loan for your buyer at 80% of market value and look to generate a hefty cash now assignment fee. Lucky for us, FHA goes up to $700K. So a house with a market value of $580K based on the properties sold in the last 3 to 6 months should be purchased at or around $460K. That leaves $120K in play. In order to ensure that the property is then purchased NO MONEY DOWN, you allow for the closing costs to be absorbed by the available equity which makes you a hero to the buyers. So the $120K turns into about $90K.
The next step is to write an invoice to the title company as a third party company for that $90K worth of services performed. As I mentioned in the beginning, it is very likely that this project is a rehab of some sort so funds must be set aside for that purpose. Another ring around the wholesale assignment is getting the buyers’ desired work and necessary updates done for them, without their involvement, by using the price they paid as a “construction loan.” So, not only can you demand 3% or more of the purchase price, putting you at almost $14K, but you can also quick turn the rehab work for profit with your 1099ed contractor team. The funds left unused go to your company and all of this happens within 10 business days.
If you can use an extra $20K or so….you may want to try this technique. Build your owner occupied buyers list and start dropping checks off at the bank.
Blessings to Your Real Estate Investing Successes,
Milton B. Yates