Real Estate Investing: Private Financing and Acquisition Techniques
Real estate is one of the best forms of investment, because it is capable of giving a hundred percent annual return. This has made it the most preferred kind of investment among investors. However, there are many factors that should be in the favor of the investor, in order to succeed. Firstly, he should be in a sound financial position and have a substantially high, regular income. Then, he must be able to have easy access to financing and have a good credit record.
Everyone does not have the benefit of having all these qualities. But that can be overcome by using techniques, which would enable smart investors with average financial resources, to make a foray into real estate investment. Let us look into some of these techniques:
. Win the trust of the seller: You must have the trust of the estate seller in your favor with respect to his receiving regular and timely equity payments from you. One of the best ways to win his trust is to give him a heavy down payment in cash.
. Keep the terms simple: Terms which are too complicated and too many, can put the seller off, and he would ask for a higher price, which would make the investment option less attractive. For example, a seller may insist on a years extension to the payment schedule, in return for a payment of an additional few thousand dollars.
. Directly ask the seller why he needs the money: Most people do not ask the seller about the reason(s) for which he needs the money, and therefore is selling the property, and just assume the reasons on their own or try to extract answers by posing diplomatic questions. You must ask the seller directly; because if you know for sure why he needs the money, you may be able to assure him of your help, thus be able to negotiate favorable terms.
. Use the Skill advantage: This can give you an edge by reducing or eliminating the down payment option. If you are an insurance agent, broker, lawyer, painter, merchant or anyone who can provide valuable service to the estate seller, you can try to offer to trade your skills/services in lieu of making a down payment.
. Raise funds through your Life Insurance Policy: Life Insurance policies that are lying unused can be sold to raise funds for other investments. It is an important asset for policyholders, allowing them to withdraw funds for more productive purposes.
. Barter other valuables for cash down payment: As mentioned above, services or skills can be traded against making cash down payment in many cases. Similarly, you may have many other items that would be valuable to the estate seller, which he may accept in lieu of a down payment. That would greatly help a cash strapped real estate investor. Such items can be antique furniture, paintings, or musical instruments. Many people trade precious gems, jewelry and precious metals to fund cash down payments.
The strategy should be to employ a technique in order to win the trust of the seller by satisfying his needs. You can take the help of professional financial advisors who would tell you about other techniques as well. The main thing to remember is that you need not be a millionaire to get into the real estate business.
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