subject: Have You Ever Wondered If You Could Do Staged Payment Deals When Buying Property? [print this page] Like many BMV investors the credit crunch had a significant impact on our business as with the low LTV's have made it hard for us to find solutions for the many motivated sellers contacting us.
After scratching our heads for a while the answer was obvious - what was stopping us pay a greater price for the property than other Investors would, just splitting that across two payments? We knew that by being able to offer more value to our customers that more people would want to work with us.
Once we had worked this out, we needed to find a process that protected both parties' interests during the period, which also assured the vendor that we were not going to disappear without making their second payment! Most importantly the solution needed to be easy to explain as from our experience, complicated processes only serve to confuse the vendor and scare them off. Well we couldn't find one we liked so we got a solicitor to draw one up for us.
As with most things, the more solutions you can offer a vendor, the more likely you are to become memorable and to win their trust. We know that in today's climate, we have to be securing a minimum of 28% discount in order for the deal to be of interest to most Investors. Naturally most vendors want to achieve the highest price for their property, so in many cases this means that they are either unable, or unwilling to take such a large discount.
Staged Payment deals have really been maximising our cash-flow over 2009 and will be much used through by us through 2010, but they are not new concepts. Basically, when you break it down, it is simply one payment on completion and another in a few years (usually 3-5). It's not dissimiliar to the ever popular Lease Options which are being used regularly by UK Investors.
This methodology has enabled us to buy properties in locations that we may not previously have considered, as we only look at these purchases on a 3 year plan - ie: buy now and sell with exit strategy. We feel the location becomes less relevant as long as the property will make good cash-flow during the term. Whilst we know the property needs to be managed during this time, we can factor in those costs into the overall ROI for the opportunity - we hold the property until we sell so that we can release the equity (discount) we have agreed. To summarise, we have a proven system that offers full legal protection for both the buyer and the seller which will mean you can do more deals.
Copyright (c) 2010 Katie Sylvester
by: Katie Sylvester
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