1. Down Payment – We require a nonrefundable down payment from each one of our tenant buyers. If we have to end up evicting the tenant, the down payment usually covers the vacancy and the repairs needed to get the property back in marketable condition.

2. Ownership Mindset – A tenant who has plans to buy a property rather than just rent will inevitably treat the property better. Tenants will even improve the property during their leasing period before they buy it.

3. Sell For Top Dollar – “Purchase price to be determined by appraisal at the time of purchase.” That is the clause that we put in each of our lease option agreements. We are able to sell property for a future appraised value and without a realtor.

If your tenant buyer buys the property, it’s time to celebrate. You just sold a property for full market value. If your tenant buyer moves out, lease option the property all over again and reap the benefits. We have found that lease options are the most profitable way to hold and sell property.

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When negotiating a deal, it is usually beneficial for us to get a seller to take back financing on a portion of the purchase price. If you are working with a motivated seller, all you have to do is hold your mouth right.

There are two parts to every negotiation: price and terms. By getting a seller to take back financing, we are working on the terms side of the deal.

Whenever you get to a price that is mutually agreeable, ask “How much of that will you need at closing?” Make sure to emphasize the word “need.” It is not how much they want but how much they need that we are interested in. Next, you set up the payment plan.

We bought a house last summer in Sumter, South Carolina. We made an offer where the seller would be receiving $22K for her equity. We asked her how much of that she would need at closing, and she said $5K. She said this would pay for her move and new apartment. So we told her that she would get $5K at closing and $3K a year towards her balance of $17K until the loan was paid in full.

This saved us from bringing an additional $17K to the table when we bought it and lowered our holding costs. Every payment of the loan goes straight towards principal. That’s my favorite kind of loan.

“Must Know” Tip: Never use the words “seller financing” or “owner financing” in your negotiations. Most sellers will not understand these terms. Once you put someone in the state of confusion, the answer is usually “No!” Get to a price that works and say, “How much of that will you need at closing?” If they want to much at closing, the price is coming down.

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Here’s another beginning real estate investor’s excuse that is inexcusable:

But I Don’t Have Enough Money to Invest.

If you contract a great deal, there is someone waiting to finance it. That money is not going to just show up on your doorstep but is easily within your grasp. A little networking within the investment club near you can provide all the contacts you need to get started.

Good Deals Get Financed! Go to the next real estate investor meeting in your area and do some networking. All it takes is stepping outside your comfort zone and making it happen. You can no longer use the excuse of not having enough money. Go make some offers!

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The following explanation assumes that you talking to a seller on the phone that has contacted you. You may talk to 15 to 30 sellers before you get a great deal so use the following questions as disqualifiers for each lead.

1. After the initial greeting, ask the seller, “What is your situation?” This question is a direct approach to finding out their motivation. If you need to clarify your question further, you could say, “Well, are you just moving to a different house or out of the area or…” (Now is where you shut up and listen) They will tell you why they are selling at this point.

2. You want to find out about the condition of the property. You might say “What would have to be done to the property for it to be in perfect condition?” If you just get a rough estimate, that will suffice. Beware that most homeowners grossly under estimate how much their house needs in work.

3. Ask the homeowner, “Is there a mortgage on the property?” If yes, you say “Approximately how much is owed?” I seldom talk to anyone that is reluctant to give up this information but if it does happen you could say, “I’m sorry but we cannot submit your property’s information for research without it” (This is another time when you shut up). They will eventually chime in with their mortgage balance.

There are other good questions you could ask, but these will allow you to make the decision, “Trash pile” or “under further review pile.” Do not spend time researching every lead thoroughly. Disqualify as many as possible as quickly as possible. If they aren’t motivated, you shouldn’t be talking to them. If they don’t have sufficient equity, NEXT!

Popularity: 5% [?]

A lot of people hear about an investment opportunity, decide to wait until the time is perfect, hear more people talking about how much money they are making on that investment, and then finally buy the thing when it’s at an all time high. I do not advocate this approach.

All I hear from anyone that knows what business I am in is “How is this market treating you right now?” With apprehension in their face and distress in their voice, I give them my now “canned” response.

“It is actually a great time for us to buy and hold properties. When it is more difficult to sell a property, there are more motivated sellers. More motivated sellers means more potential deals for us. We know that if we want to sell a property, all we have to do is put in more upgrades than other houses in the area and list it for cheaper.”

The most important thing to remember: Buy Right! As an investor, we make our money when we buy, not when we sell.

Popularity: 5% [?]