The American Education Institute

MAKE THE PURCHASING LOW AND THE REFINANCING HIGH

This is actually a variation of 100% financing whereby, if you can come up with a lot of cash, you can quite often “steal” a property at an incredible bargain.  For example, you might sometimes be able to purchase properties from desperate owners for 75% to 80% of their fair market values.  Critical emergencies in a property owner’s life quite often dictate such deals.  He might need to unload an apartment building in a big hurry to raise cash himself for some urgent reason, and if you can come up with it for him, he’ll deed you that property for three-fourths what it’s worth.  This is a deal you really don’t want to pass up.  So in this case, the financing aspect may exist in how well and how fast you can borrow to the max.

It might involve, for example, a partner or two.  Many a lasting partnership in real estate ventures were started for just this reason.  One person might only be able to borrow maybe tens of thousands (by borrowing against credit cards, taking out unsecured loans, second mortgaging, and borrowing against home equity, for example), but three or fur persons together can sometimes come up with hundreds of thousands of dollars.  And maybe two or three hundred grand is all you need to set up a fortune for life.

Don’t forget this too:  after you pay cash for a property and acquire the deed free and clear, you can then turn around and refinance it completely (100% financing again) for what it is truly worth.  That, in turn, will bring all of that borrowed cash back to you.  You can then repay all of those loans and usually stuff you own pockets besides.  How guess what?  You’ve just generated more capital that you can use for buying more properties!

One more thing you may be able to do with a real “bargain” property is come up with a little more money to make repairs and improvements, so that is becomes worth more than the original FMV on which you discount-for-cash was based.  Now when you refinance at 100%, or even at the traditional 80%, the property value is higher and you’ll receive back considerably more cash than you originally put in; and that means even more profit (capital) that you can apply to future purchases.  Plus you can charge more rent and make more money month after month.  If you decide to sell the property later, your profit will be even greater yet because it cost you so little to begin with.

Going back to the partnership idea,  you should consider this too:  Most really successful professional people have cash on hand that they are always looking to invest profitable, but they don’t have the time or know-how to accomplish this wisely.  Have you ever heard of wealthy doctors taking a bath on worthless oil wells, gold mining operation, or even out-and-out scams?  It happens all too often.  You, on the other hand, may have the opposite problem.  You have the knowledge about great investments in real estate, for example, but very little money to act on them.  This is where a partnership can really pay off.

You might consider approaching such professionals and leave them with a portfolio of real estate investment opportunities which could be shared in terms of partnership.  Many a lasting and lucrative arrangement has been created in just this fashion, with one partner scouting out the deals and the other supplying the capital.  Even with a 30-70 percent of 20-80 percent partnership agreement, if you earn just 20% of the profits on some lucrative deal, you are still 20% more ahead of the game than you would be without such a partner.  And after awhile, you should be earning enough to enter into 50-50 arrangements or go it completely alone.  Once again, this is truly a win-win situation for all parties concerned.

Dr. Eric T. Martin / 100% Financing When Buying Real Estate / 12-25-09