Archives For Financing

Reference Book – A Real Estate Guide

* Please note, format and page numbers differ from the printed version. The printed version will be available for purchase after January 5, 2011. To purchase a copy, submit a Publications Request (RE 350) . The chapters of the Reference Book below are in PDF format. You will need Adobe Reader to view them.

Reference Book

  • Introduction
    Cover, Preface, Location of Department of Real Estate Offices, Past Real Estate Commissioners, A Word of Caution
  • Chapter 1 – The California Department of Real Estate
    Government Regulation of Brokerage Transactions, Original Real Estate Broker License, Corporate Real Estate License, Original Salesperson License, License Renewals – Brokers and Salespersons, Other License Information, Continuing Education, Miscellaneous Information, Prepaid Residential Listing Service License, Enforcement of Real Estate Law, Discrimination, Notice of Discriminatory Restrictions, Subdivisions, Department Publications, Recovery Account
  • Chapter 2 – The Real Estate License Examinations
    Scope of Examination, Preparing for an Exam, Exam Construction, Examination Weighting, Exam Outline, Exam Rules – Exam Subversion, Materials, Question Construction, Multiple Choice Exam, Q and A Analysis, Sample Multiple Choice Items
  • Chapter 3 – Trade and Professional Associations
    Real Estate Associations and Boards, Related Associations, Ethics
  • Chapter 4 – Property
    Historical Derivations, The Modern View, Personal Property, Fixtures, Legal Difference Between Real and Personal Property, Land Descriptions, Other Description Methods
  • Chapter 5 – Title to Real Property
    California Adopts a Recording System, Ownership of Real Property, Separate Ownership, Concurrent Ownership, Tenancy in Partnership, Encumbrances, Mechanic’s Liens, Design Professional’s Lien, Attachments and Judgments, Easements, Restrictions, Encroachments, Homestead Exemption, Assuring Marketability of Title
  • Chapter 6 – Transfer of Interests in Real Property
    Contracts in General, Essential Elements of a Contract, Statute of Frauds, Interpretation, Performance and Discharge of Contracts, Real Estate Contracts, Acquisition and Transfer of Real Estate
  • Chapter 7 – Principal Instruments of Transfer
    A Backward Look, the Pattern Today, Deeds in General, Types of Deeds
  • Chapter 8 – Escrow
    Definition, Essential Elements, Escrow Holder, Instructions, Complete Escrow, General Escrow Principles, General Escrow Procedures, Proration, Termination, Cancellation of Escrow – Cancellation of Purchase Contract, Who May Act As Escrow Agent, Audit, Prohibited Conduct, Relationship of Real Estate Broker and the Escrow Holder, Designating the Escrow Holder, Developer Controlled Escrows – Prohibition
  • Chapter 9 – Landlord and Tenant
    Types of Leasehold Estates, Dual Legal Nature of Lease, Verbal and Written Agreements, Lease Ingredients, Contract and Conveyance Issues, Rights and Obligations of Parties to a Lease, Condemnation of Leased Property, Notice Upon Tenant Default, Non-Waivable Tenant Rights, Remedies of Landlord, Disclosures by Owner or Rental Agent to Tenant
  • Chapter 10 – Agency
    Introduction, Creation of Agency Relationships, Authority of Agent, Duties Owed to Principals, Duties Owed to Third Parties, Rights of Agent, Termination of Agency, Special Brokerage Relationships, Licensee Acting for Own Account, Unlawful Employment and Compensation, Broker-Salesperson Relationship, Conclusion
  • Chapter 11 – Impact of the Penal Code and Other Statutes
    Penal Code, Unlawful Practice of Law, Business and Professions Code, Civil Code, Corporations Code
  • Chapter 12 – Real Estate Finance
    Background, The Economy, The Mortgage Market, Overview of the Loan Process, Details of the Loan Process, Federal and State Disclosure and Notice of Rights, Promissory Notes, Trust Deeds and Mortgages, Junior Trust Deeds and Mortgages, Other Types of Mortgage and Trust Deed Loans, Alternative Financing, Effects of Security, Due on Sale, Lender’s Remedy in Case of Default, Basic Interest Rate Mathematics, The Tools of Analysis
  • Chapter 13 – Non-Mortgage Alternatives To Real Estate Financing
    Syndicate Equity Financing, Commercial Loan, Bonds or Stocks, Long-Term Lease, Exchange, Sale-Leaseback, Sales Contract (Land Contract), Security Agreements (Personal Property)
  • Chapter 14 – Real Estate Syndicates and Investment Trusts
    Real Estate Syndication, Real Estate Investment Trusts
  • Chapter 15 – Appraisal and Valuation
    Theoretical Concepts of Value and Definitions, Principles of Valuation, Basic Valuation Definitions, Forces Influencing Value, Economic Trends Affecting Real Estate Value, Site Analysis and Valuation, Architectural Styles and Functional Utility, The Appraisal Process and Methods, Methods of Appraising Properties, The Sales Comparison Approach, Cost Approach, Depreciation, Income (Capitalization) Approach, Income Approach Process, Income Approach Applied, Residual Techniques, Yield Capitalization Analysis, Gross Rent Multiplier, Summary, Appraisal of Manufactured Homes (Mobilehomes), Evaluating the Single Family Residence and Small Multi-Family Dwellings, Typical Outline for Writing the Single Family Residence Narrative Appraisal Report, Conclusion, Additional Practice Problems, The Office of Real Estate Appraisers (OREA)
  • Chapter 16 – Taxation and Assessments
    Property Taxes, Taxation of Mobilehomes, Special Assessments, Certain Assessment Statutes, Federal Taxes, Documentary Transfer Tax, State Taxes, Miscellaneous Taxes, Acquisition of Real Property, Income Taxation
  • Chapter 17 – Subdivisions and Other Public Controls
    Basic Subdivision Laws, Subdivision Definitions, Functions in Land Subdivision, Compliance and Governmental Consultation, Types of Subdivisions, Compliance With Subdivided Lands Law, Handling of Purchasers’ Deposit Money, Covenants, Conditions and Restrictions, Additional Provisions, Grounds For Denial of Public Report, Subdivision Map Act, Preliminary Planning Considerations, Basic Steps in Final Map Preparation and Approval, Types of Maps, Tentative Map Preparation, Tentative Map Filing, Final Map, Parcel Map, Other Public Controls, Health and Sanitation, Eminent Domain, Water Conservation and Flood Control, Interstate Land Sales Full Disclosure Act
  • Chapter 18 – Planning, Zoning, and Redevelopment
    The Need For Planning, General Plans, Redevelopment
  • Chapter 19 – Brokerage
    Brokerage as a Part of the Real Estate Business, Other Specialists, Operations, Office Size – Management, Office Size, Career Building, The Broker and the New Salesperson, Specialization, A Broker’s Related Pursuits, Professionalism, Mobilehome Sales
  • Chapter 20 – Contract Provisions and Disclosures in a Residential Real Estate Transaction
    A Basic Transaction, A Basic Listing, Purchase Contract/Receipt of Deposit, Disclosures
  • Chapter 21 – Trust Funds
    General Information, Trust Fund Bank Accounts, Accounting Records, Other Accounting Systems and Records, Recording Process, Reconciliation of Accounting Records, Documentation Requirements, Additional Documentation Requirements, Audits and Examinations, Sample Transactions, Questions and Answers Regarding Trust Fund Requirements and Record Keeping, Summary, Exhibits
  • Chapter 22 – Property Management
    Professional Organization, Property Managers and Professional Designations, Functions of a Property Manager, Specific Duties of the Property Manager, Earnings, Accounting Records For Property Management
  • Chapter 23 – Developers of Land and Buildings
    Subdividing, Developer-Builder, Home Construction
  • Chapter 24 – Business Opportunities
    Definition, Agency, Small Businesses and the Small Business Administration, Form of Business Organization, Form of Sale, Why an Escrow?, Buyer’s Evaluation, Motives of Buyers and Sellers, Counseling the Buyer, Satisfying Government Agencies, Listings, Preparing the Listing, Establishing Value, Valuation Methods, Lease, Goodwill, Fictitious Business Name, Franchising, Bulk Sales and the Uniform Commercial Code, California Sales and Use Tax Provisions, Alcoholic Beverage Control Act
  • Chapter 25 – Mineral, Oil and Gas Brokerage
    History, Mineral, Oil and Gas Brokerage, 1994 – No Separate License Requirements
  • Chapter 26 – Tables, Formulas, and Measurements
  • Chapter 27 – Glossary

Seller Financing

In some situations, sellers are lining Lending Standards, Seller Financing. CFPB
Finalizes Loan 2013, The Consumer Financial Protection Bureau – 2012-03-15

Seller Financing May Be Worth Exploring | Realtor Magazine

In today’s stymied real estate market, lenders are more cautious about making loans and sellers are more inclined to agree to carry financing to sell their properties more quickly. Here’s a look at how installment sales could work for your clients. – 2008-12-01

Get Seller Financing to Work for You | Realtor Magazine

Seller financing has been a hot issue in recent real estate news due to the changes in regulations, specifically in the Dodd-Frank Act. Here’s what you need to know to incorporate this method into your business strategy and be the best advocate for your clients. – 2015-04-06

Seller Financing: Background

Seller financing is subject to new rules following the passage of financial reform legislation. Know these changes in order to serve sellers better. – 2012-01-17

My Account

Seller financing plays an important role in financing the sale of real estate, especially when credit is tight. This paper summarizes the impact of two federal laws that affect seller financing. Seller financing plays an important role in financing the sale of real estate, especially when credit is tight. This paper summarizes the impact of two federal laws that affect seller financing. – 2012-01-12

Sales Clinic: Expand Your Market with Seller Financing | Realtor Magazine

Are there any creative ways to sell a home that will maximize the salesperson’s value? —Timothy Baker, RE/MAX Affiliates, Naperville, Illinois If you want to be a top salesperson, you always have to be on the lookout for new and creative ideas to set yourself apart from the pack.…/feature/article/1999/12/sales-clinic-expand-your-market-seller-financing – 1999-12-01

Ways to Protect Yourself Under Seller Financing | Realtor Magazine

TIP: Instead of taking back an installment loan, per se, have the buyer purchase an annuity or some zero-coupon bonds in your name. These can often be bought at deep discounts to eventual payout, lowering the sale price, but guaranteeing you a higher future return.…/sell-your-business/article/ways-protect-yourself-under-seller-financing

NAR Submits Comments on CFPB’s Proposed Seller Financing Rules

On Oct. 15, 2012, NAR President submitted comments to the CFPB on its loan originator proposed rule. On Oct. 15, 2012, NAR President submitted comments to the CFPB on its loan originator proposed rule. – 2012-10-19

Sellers Can Fill a Void | Realtor Magazine

If you’re working with sellers who have seen offers collapse because buyers can’t get a mortgage loan, you might want to suggest they consider offering some variation of seller financing. – 2011-07-01

Seller Financing: The SAFE Act

In 2008, President Bush signed the Secure and Fair Enforcement of Mortgage Licensing Act or SAFE Act, which requires licensing and registration of loan originators. – 2012-03-15
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Looking for something else? Search the archive for many resources created before 2009.


Field Guide to Lease-Option Purchases

(Updated April 2016)

Lease-option agreements* are common when acquiring personal property—such as dishwashers, washing machines, automobiles, and TVs—but are not as common for the acquisition of real property. Lease-option agreements are generally utilized in residential real estate acquisition when a home buyer would like to purchase a home, but needs to repair her credit rating in order to secure a promissory note and mortgage. The lease-option agreement allows a buyer to lease a property for a set period of time—typically between 1-3 years—with the option to buy the property at a contractual future date. “The negotiated option is typically a percentage of the price for example, one to five percent, and is credited, along with the rents and a rent premium, to the purchase price if the lessee buys the property. If the option to buy is not exercised, the buyer will lose the option fee and rent premium.” (Real Estate Law (link is external), p. 227). Read the articles below to learn more about this alternative real estate financing option. (H. Hester, Information and Digitization Specialist)

*Also known as lease-to-own, rent-to-own, lease/purchase, lease with an option to purchase, or real options.

E – EBSCO articles available for NAR members only. Password can be found on the EBSCO Access Information page.

Lease to Own: The Basics

Is rent-to-own the future of housing? (link is external), (HousingWire, Jan. 14, 2016).

Investors Bank on Rent-to-Own Comeback (REALTOR® Magazine, July 29, 2015).

How do Lease Purchase Agreements Work? (link is external) (SFGate, n.d.).

How Do I Get a List of Rent to Own Homes? (link is external) (®, July 25, 2012).

How Do I Find A Rent To Own Home In Bristol, Pennsylvania? (link is external) (®, May 10, 2012).

How Do I Find A Realtor To Explain The Rent To Own Option? (link is external) (®, Apr. 6, 2012).

Lease-to-Own Contracts (link is external), (UCLA School of Law, 2012).

Lease options are back: proceed carefully (link is external), (Realty Times, Oct. 25, 2011).

Sale-Leaseback Transactions: Price Premiums and Market Efficiency (link is external), (Journal of Real Estate Research, Apr.-June 2010). E

Informal Homeownership in the United States and the Law (link is external), see page 132. (University of Texas School of Law, 2010).

How lease-options benefit sellers, buyers … and their REALTORS®? (link is external), (CRE Online, n.d.).

Thought about lease-to-own transactions?, (REALTOR® Magazine – Speaking of Real Estate blog, Aug. 6, 2009).

Renting to Own (link is external), (®, n.d.)

Case Studies & Examples

A Valuation Framework for Rent-to-Own Housing Contracts (link is external), (The Appraisal Journal, Summer 2014). E

Lease-to-own deals offer options in sluggish Tampa Bay housing market (link is external), (St. Petersburg Times, Oct. 23, 2011).

Can I get a lease option with bad credit? (link is external), (®, May 5, 2011).

A Growing Housing Imbalance (link is external), (Mortgage Banking, Oct. 2011). E

Raising Capital Through Sale-Leasebacks (link is external), (Public Management, June 2010). E

Tax Implications

Individual Taxation Developments (link is external), (The Tax Adviser, Mar. 2012). E

Comparing Accounting and Taxation for Leases: Certified Public Accountant (link is external), (The CPA Journal, Apr. 2009). E

Tax Considerations for Buying and Selling Property with a Burdensome Lease (link is external), (Journal of Accountancy, 2009). E

Government Publications & Programs

State Agency Lease/Purchase Program (link is external), (Washington State Treasurer’s Office, n.d.).

Recent State Agency Lease/Purchase Interest Rates – Real Estate Only (link is external) (Washington State Treasurer’s Office, n.d.).

Definition from Washington State:

Lease/Purchase Obligations (Real Estate) — Lease/purchase obligations are contracts entered into by the state which provide for the use and purchase of real or personal property, and provide for payment by the state over a term of more than one year. For reference, see RCW chapter 39.94 “Financing Contracts.” Lease/purchase obligations are one type of lease-development alternative.” (Financial Budget Instructions Glossary of Terms (link is external), Washington State Office of Financial Management, n.d.).

Non-Mortgage Alternatives to RE Financing (link is external) from Reference Book – A Real Estate Guide (link is external), (California Department of Real Estate, 2010).

LFC Hearing Brief (link is external), (New Mexico Legislative Finance Committee, Dec. 2007).

Instructions for the Lease/Purchase Analysis Modeling Tool (link is external), (Idaho State Leasing Dept. of Administration, n.d.).

eBooks & Other Resources

The following eBooks and digital audiobooks are available to NAR members:

Smart Guide to Real Estate: Step by Step Rent to Own, (Kindle and ePub)

Investing in Rent-to-Own Property, 2010 (ePub)

Investing in Real Estate With Lease Options and “Subject to” Deals, 2005 (ePub)

Books, Videos, Research Reports & More

The resources below are available for loan through Information Services. Up to three books, tapes, CDs and/or DVDs can be borrowed for 30 days from the Library for a nominal fee of $10. Call Information Services at 800-874-6500 for assistance.

Who Says You Can’t Buy a Home! (link is external) HG 2040.5 R25w (2006).

Field Guides & More

These field guides and other resources in the Virtual Library may also be of interest:

Sale-Leasebacks & Synthetic Leases

Seller Financing

Information Services Blog

Have an Idea for a New Field Guide?

Send us your suggestions (link sends e-mail).

The inclusion of links on this field guide does not imply endorsement by the National Association of REALTORS®. NAR makes no representations about whether the content of any external sites which may be linked in this field guide complies with state or federal laws or regulations or with applicable NAR policies. These links are provided for your convenience only and you rely on them at your own risk.

Search Results for: seller financing
Can I Buy An Investment Property Using Seller Financing If I Am A Realtor?

Q: Can I purchase investment properties using seller financing if I am a Realtor? I would like to purchase properties for investment. I am currently a home owner. –Kim, Nashville,

July 12, 2011
What’s The Best Incentive A Buyer Can Offer To Get A Seller To Lower His Price?

Q: My husband and I are house hunting and have seen a home we love from the outside. We called the listing agent to set up a showing and he

August 15, 2012
Is There Financing For People With Low Credit Scores?

<Q: I currently have lived in a home for two years buying on land contract. The owner is calling the note but as of today my score is only 495.

May 23, 2012
What Happens If The Winning Bidder Can’t Get Financing For The House?

Q: What if for some reason the buyer that won the bid cannot finance the house. Do they pick a different bid or next highest? –Debbie, Owosso, MI A: That

May 8, 2012
Do I Get My Earnest Money Back If I Could Not Obtain Financing?

Q: If I put an offer on a house and I did not get financing and my Realtor emailed me and said that they were releasing the house so it

April 10, 2012
Who Is Responsible For Making Sure The Seller’s Disclosure Is Complete?

Q: When a first time buyer is going through the complicated process of viewing/signing the various forms in the home buying process, is it his Realtor’s responsibility to explain all

April 6, 2012
Are There Types Of Creative Financing That Can Minimize A Down Payment?

Q: My wife and I are now retired with a very comfortable combined monthly income between pension checks, an annuity and social security income for both of us. We would

March 16, 2012
Can A Seller be Sued For Interference?

Q: If I am in process to buy a house and it’s a short sale, can the seller order me to pay for the property appraisal and home inspection? And

February 17, 2012
Can I Get Financing From Somewhere Other Than A Bank?

Q: I am trying to buy my first home, and would like to know if is there other ways to get financing other than a bank.–Ralph, Philadelphia, PA A: Most

February 10, 2012
The Seller Refuses To Pay Commission To Our Realtor, What Should We Do?

Q: If we were working with a Realtor and the seller refuses to pay a commission how should we handle? The Realtor had showed us approximately 20-25 homes. They did

December 30, 2011

via Search Results for “seller financing” – Real Estate News and Advice –

7 Tips to Fix Mistakes in Your Credit Report
It’s not easy and it’s not quick, but at least we have tips you need to fix your credit report.
Image: Federal Trade Commission
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Topic Your Money, Finances & Taxes, Financing
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Is your credit report telling lies about you? Credit report errors happen all the time, especially if you have a common name. Dispute them pronto, so you don’t end up paying more than you should for your mortgage and home owners insurance, or have trouble getting credit.
Tax papers stored in a home office
Avoid Costly Financial Mistakes

The 4 Dangers You Face If You Don’t Back Up Your Tax and Financial Records
Tax and Home Records Checklist: What to Keep and For How Long
Don’t Miss These Home Tax Deductions

Just remember: Removing errors is a DIY project. So don’t get baited by credit repair servicers (“Pay us before we do any work on your behalf;” “Don’t contact the credit reporting companies directly” ) — these pitches are usually scams. Instead, try these seven tips for fixing credit report mistakes.

via Disputing Credit Report | How to Fix Your Credit Report | HouseLogic

Seller Financing and Lease Options It is all about the TERMS of the Deal – If you can not get the PRICE low, get great TERMS – Good with little equity or sellers who can wait for their cash – Exit Strategy is either Sell It or Keep It – Create No Qualifying Financing for YOURSELF or YOUR NEW BUYER.
Money and Real Estate Financing Anything that has to do with Financing Real Estate – Credit Rating;
Bank Financing; Hard Money Financing; Private Lender Financing
— Bank Financing and Mortgage Brokers Mortgage Brokers will ask for things that you need to supply as an
— Hard Money Financing Hard Money Lenders usually do not ask for credit rating; They charge
4 – 8 pts, interest only 8% to 15%; and only lend 60% to 70% of
appraised after-repaired value. Usually for Rehabs.

5 Ways to Collect Cash When Buying No Money Down
by Richard Roop

By definition, a real estate investor puts up some money and “invests” it into real estate deals.

As a real estate “entrepreneur,” I prefer to avoid tying up any of my money in my real estate investments. In fact, I prefer to collect some of my profits on the same day I buy a house.

That way, I don’t have to be in a hurry to sell. Then I have money to further my real estate education, pay operating costs, invest in systems to grow my business… and write myself a paycheck!

Get your money out quickly
Now, I’m willing to wait for my profit on the back end. And I’ll even consider “investing” small amounts into a house like a small down payment plus money for holding and touching up the property.

Ideally though, I’ll want to get my money back out quickly once the house is occupied by a buyer or tenant/buyer.

There are many different approaches to real estate investing, and I certainly don’t have the only plan. Your approach will depend on your own personal desires and skill set.

But to put my “collect cash when buying” strategies into context, I’ll briefly describe my real estate business…

I buy mostly single family homes. I rarely buy houses listed with real estate agents unless it’s an all cash deal. I prefer to negotiate directly with the owner.

I don’t use my good credit or banks to finance my purchases. Typically I acquire homes taking them “subject to” the existing mortgage using a land trust or agreement for deed.

That means I get no-bank-qualifying owner financing. For cash deals, I use hard money lenders or private lenders. I get motivated sellers to call ME

I don’t call sellers. I prefer to use real estate marketing systems that are easy to implement and easy to repeat.

For each of the seven to 15 calls I receive, I’ll find one seller who is flexible and motivated enough to allow me to buy creatively, or at a price and terms that works for both of us.

You won’t get that type of closing ratio calling ads in the paper.

To buy directly from sellers, I use a number of low-cost real estate marketing tools to get them to call me and to get them to ASK ME to buy their houses. (See How to Get Motivated Sellers to Call You.)

Working 20 hours per week with a small staff, I buy and occupy three or four houses per month. If I cannot make at least $20,000 net profit, it’s just not a deal.

If the sellers have a lot of equity, they typically take it back in a note due upon the “refinance” of the home. The refinancing occurs when my buyer or tenant/buyer gets a new loan.

That’s from one to 36 months down the road–most common is two to three years. But some of the 57 properties I own today were bought over five years ago and have appreciated nicely.

After I buy a house, I put it on the market with a flexible seller financing. That includes doing “wraparound” owner financing or selling on a “rent-to-own.” I don’t list my homes with agents or rely on my buyer getting a bank loan to close.

Your marketing edge–offer attractive terms By offering terms, I make the home more desirable and more valuable. I get it occupied fast and under contract for top dollar, even in a slow market.

I can also sell a house “as is” if it needs some work offering my “trade sweat for equity” program.

Many buyers like that opportunity, and I can eliminate some of the frustration or costs that are common when dealing with contractors.

I avoid dealing with renters and all the landlording challenges that come with it. Instead, the homes I still own are occupied by tenant/buyers who have paid me a non-refundable “purchase deposit” to buy at a later date.

They can earn a modest credit toward buying the home for each “on time” rental payment, plus they agree to take care of all repairs andmaintenance.

Since they are planning to buy, they typically are interested in taking care of the property, even doing major improvements which are also non-refundable in the event they do not close.

No limit to the number of house you can buy Think about it. If you don’t tie up your own money for very long when you
buy, or you actually collect some cash when you buy, what’s the limit to the number of houses you can buy each month?

And if you avoid landlording headaches by selling with owner financing or “rent until close” terms, what’s the hurry to cash out?

Most of the homes I buy require little or no money down. I still find investors to this day who say that that is not possible. That amazes me. On my best deals, I actually get cash when buying.

So here are my top five ways to put cash in your pocket when you BUY a house…

1. Overborrow with no bank qualifying when paying cash
Most of the houses I buy are “subject to” the existing mortgage. That’s
because most sellers owe more than I’d be willing to pay cash. So I tell them,

“You owe more on the house than I can pay cash as an investor. I get a high return on my cash. It wouldn’t make much sense to pull my cash out of other investments to buy your house at the price you say you need.

The only way I could come close to your price would be to take over the existing loan and relieve you of the debt. Would you even consider that… if I can get you an acceptable price?”

Other times they have enough equity. What if the seller insists on all cash? Most of the houses I buy all cash need a lot of repairs, or are owed by a bank, or both. That’s for my market.

Prices here range from $50,000 to $300,000 with an average $165,000. When you buy in the very low price ranges, then you may be doing more cash deals. For me, only one out of 10 houses I buy require a lot of cash.

I get my cash from hard money lenders and private lenders. In a nutshell, I pay 9% to 13% interest. And then I pay zero to 10 points. I have credit lines that would cost me less, but they have limits.

I like having unlimited funds to buy houses and keeping my credit or credit lines open for emergencies. I consider the cost of these funds when I construct my offers, so I’ll make a huge profit regardless of the interest or points I pay.

My “collateral” lenders don’t look at my credit report, only the value of the property being used as security. I can borrow 65% to 70% of the property’s value with no qualifying.

In fact, if I cannot borrow enough to buy and fix the house without qualifying, then it may not be a great buy… and there are better deals to out there.

A seller of a $100,000 house needs cash; I may offer $61,237 cash, an amount plucked out of the air (near 60% and looks like I really crunched the numbers).

I then borrow $70,000 and pay 5 points, costing me $3,500 and netting $66,500 in cash to close. I walk away from the closing table with over $5,000 in my pocket on the day I buy the house.

Recently, just so there would be no confusion on a transaction, I called Beth (my closing agent at the title company) to let her know I’d be GETTING money at closing as the buyer.

She responded, “Richard, that’s no surprise. It would be more unusual if you BROUGHT me a check to closing.”

Can you find a ton of deals like this all the time which you can buy so cheap? No. But they are out there and you’ll find them now and then if you’re “in the game.”

2. Overborrow with no bank qualifying when buying with owner financing
When I started my real estate investing business in 1996, I couldn’t find enough cash deals to keep me busy. I still can’t… cash deals that is.That’s why I developed a number of ways to buy all types of houses, using creative financing. And this is my favorite.

When I find motivated sellers with a lot of equity, there’s a good chance I’ll use this strategy to get them a higher price than an “all cash” offer.

I had a seller who agreed to sell a free and clear property for $107,000 if I gave him $30,000 down. He’d carry $77,000 at 7% interest, or about $700 a month for 15 years.

It needed $20,000 in repairs and would resell for $169,500 with owner financing after it’s fixed up.

I borrowed the $30,000 down, plus $20,000 in repairs, plus an extra $20,000 for a total of $70,000 from a private lender. My lender got a first lien, and the seller got a second lien. The seller also agreed to subordinate (stay in second position) to any new first loan on the property in the future.

The terms of the first were 13% and 5 points with a 3 year balloon.
Payments worked out to about $760 a month. The total monthly with the first and second mortgages totaled $1,460.

Market rent was $1,395. I’d have a small negative cash flow, but I’d walk away from the closing with $36,500 in cash which included my rehab money of $20,000 (less a couple thousand for closing costs.)

I put the house on the market for:

“$169,500 fixed up–make offer as is. Owner can finance.”

After two weeks I did not have a buyer, so I began fixing up and spent $5,000 before finding my buyer. They agreed to buy for $160,000 on an “agreement for deed” if they could do the rest of the work as their down payment before moving in.

They agreed to pay $1,300 a month and refinance within two years. To me it was like getting $15,000 down because that’s what I would’ve paid to finish the house.

Some “real estate investing educators” say don’t over borrow. But I only owe $147,000 and I am collecting on a $160,000 note. I still have $13,000 coming to me.

3. Overborrow with no bank qualifying, buy with owner financing, and substitute other equity as collateral

On a recent postcard campaign (see The Ultimate Direct Mail for Buying Houses) I bought five houses in six weeks. On the fifth house, the seller only owed $18,000 on a nice $170,000 house.

He did not need all his cash, but he insisted on getting $63,000 at closing. The $18,000 he owed would be paid off out of that.

He also insisted on 6% interest on the money he carried back in a note.

And he insisted on a price no less than $153,000. He’s getting 90% of retail value. That’s quite a fair price, isn’t it?

Here’s what I could’ve done…

Borrow $70,000 at 11% and 8 points, 15-year amortization with 3-year balloon. Loan would cover cash to seller, lender points, and closing costs.

My payments would be about $800 a month, leaving enough extra positive cash flow from rental income to give the seller a monthly payment on his equity.

At a price of $153,000, he would have a second mortgage for $90,000. I’d owe $160,000 on a house to be sold for $179,500 with terms.

But here’s what I did instead…

I borrowed $123,000 from my private lender. Payments are about market rent, or $1,400. I gave seller his $63,000 cash, but I walked away at closing with $60,000 less closing costs.

The seller agreed to have his $90,000 secured with five different second mortgages on five different houses–the five houses I just bought from the postcard campaign–including his.

If I only used his house in the deal, I’d owe $213,000 and be upside down.


I offered his price for $153,000 with $63,000 down. I gave him five second mortgages each with no payments and a five year balloon. I agreed to the 6% interest but it would accumulate for five years with no payments.

His $90,000 would grow to $121,000 by the time I paid him off.

In essence, I was able to tap into the profits

I just created in these five houses… equity at the high-end of each house’s “loan-to-value”…

PLUS I got it at 6% interest, no bank qualifying, minimal closing costs,no discounting of my equity, and no payments.

AND I had him grant me the right to substitute equal or better collateral in case I resold any of those homes over the next five years! What wouldyou do with an extra $60,000 in cash?

4. Close only when you find your buyer
If you’ve noticed in slow down in your housing market, or found it’s taking longer to get your houses occupied, then be more cautious and buy better.

In fact, you can buy with no risk when you find the right type of house and motivated seller…

“I appreciate the fact that you’ll sell me your house for what’s owed plus $1,000 in moving money, but with the way things have been going, I cannot commit to taking over your loan until I line up my occupant. Your house has too much owed against it.

Now, I do have a program to help home buyers get into a house when they need some time before getting a bank loan. And 60% of the general public is in that position.

This gives me a strong marketing advantage when I buy houses. I can offer to finance my buyer myself or rent the home until they close later.

Therefore, I’ll agree to buy your house if you can give me some time to find a buyer. Once I do, I’ll give you your $1,000 and start making the loan payments, getting that debt off your back.”

When they agree, I advertise the house with “owner financing” or “no bankqualifying” or “rent-to-own.” We get at least 3% to 5% down from a tenant/buyer as a non-refundable purchase deposit. This works the same as option consideration on a lease option.

If I’m selling for $179,500, then I’ll get at least $5,000, plus the first month’s rent. Then I can complete my deal with the seller and enjoy the difference ($4,000) immediately.

Be careful to use this only if the seller doesn’t care what you sell it for or when they have already vacated the home. Sometimes I’ll have the seller show the house for me!

You can also use this strategy if the seller’s payments are in default, and use the buyer’s money to cure the default.

5. Require the seller to pay when you buy the house An important lesson here. For years I did not do this.

I think it’s critical to always tell the seller what you are willing to do, even if (in your mind) it’s unlikely they would ever accept your offer. You’ll never know ALL their underlying motivation, so don’t make decisions for them.

When you’re not excited about the deal, consider what price or terms would get you excited.

I had a couple call on my marketing. They owed $147,000 and wanted to sell for what they owed. I did comps and determined it was worth $147,000, and I could sell for $157,000 with easy terms.

At the time I needed a minimum $20,000 spread between my buy price and mysell price. These days it’s $30,000 or 10%.

I told them they owed too much. Thanks for calling, but there was nothing I could do.

They called me back one year later after listing it for $159,500. It didn’t sell because it was overpriced to be sold retail, but priced to cover commissions and closing costs. When they called the second time it was still the same situation.

But this time I said “The only way I can buy your house is to take over your loan and have you come up with $10,000 in cash at closing. Are you ina position to do that?”

Apparently they were going to raise the cash anyway to get the house sold through another agent at a lower price. The house was now vacant, and they were getting desperate.

They got a signature loan not secured by the house and brought $10,000 to closing one week later.

Three weeks later I found a buyer with $13,000 to put down.

When occupied, I had already collected $23,000 of my $20,000 spread! I knew I’d have to bring some money to closing once my new buyer refinanced down the road. But that was OK.

I could have paid down the mortgage by $3,000, but decided to keep the cash.

6. Bonus: Simultaneously buy and sell for cash
Need cash to get started in real estate investing or pay some bills?
Find a deal and sell it the same day you buy it.
No cash needed, no holding costs, and no landlording.
This is called flipping and yes, it’s legal.

There are several ways to do this.
I use this strategy only when a seller must have all cash, but more cash than I can raise using a hard money or private lender.

When you sell a house for cash or new loan for full value, it’s called retailing.
I hate retailing.
I prefer to offer a great price or great terms.

I need a marketing advantage to resell. Otherwise I’m not interested in the deal.

I can still offer terms to a buyer who is getting a new loan by taking as much as all my profit in a second mortgage.
I’d be willing to do this rather than lose the deal.

Recently a seller called me. Sometimes I get so many leads I don’t have time to call back everyone, as in this case. He called several times, which forced me to respond.
This is a lazy way of prescreening leads…but it works!

His house had gone to foreclosure. In our state, he had a couple months to redeem the house by coming up with the foreclosure sale price in cash.

I agreed to buy his interest (get the deed) and then look for a new buyer.

I made no guarantees. He had nothing to lose.
If successful, I’d get the first $10,000 in profit, and then we’d split any profit over that. He agreed.
Otherwise, he was about to get nothing.

I placed a sign in the yard, ran a classified ad, and added the house tour web site.
I said “owner can finance” since I’d take my profit in a note.
Bottom line: a neighbor bought the house with a new loan, did not ask me to carry a note, so we got cashed out.

I made $18,000 and the seller got $8,000.
My only risk was the cost of marketing and a little time.
I also created the equity by getting the second lien holder to take a huge discount.

The bank was happy to get $4,000 for their $40,000 mortgage because they were about to be wiped out after the redemption period. I forgot to ask the first mortgage holder to discount!

Remember, there’s no limit to the number of houses you can “invest in” when you buy AND get cash at the same time.

About the author…

Richard Roop is a full-time investor who has been called The MarketingConsultant for Real Estate Entrepreneurs. He is the President of BottomLine Results, Inc., a real estate acquisition company located in Woodland Park, Colorado since 1996.

As a successful marketing consultant since 1984, Richard specializes in providing innovative business and marketing advice to real estateentrepreneurs. His articles have appeared in various entrepreneurial, realestate, and marketing newsletters across the nation, and he is the author of How To Sell Your Home in 9 Days.

How to Collect 5-Figure Paychecks Buying and Selling Houses


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