Here is an incredibly powerful strategy for generating real estate profits in any market. Please note, however, that this technique may require an investment of two or three thousand dollars, and that the money invested is a bit more "at risk" than usual. But the return on investment can be phenomenal, and can build your net worth incredibly fast. Even after taxes, your investment can more than quintuple (x5) in just one year! Even gold (or oil) is not doing that well.
The basic structure is in the form of an option, but this is no ordinary option (a copy of the actual form used by the author is included in "The Simple Man's Guide to Real Estate", and can be created easily by editing the option agreement in the agreement maker software included in the program). the course is also more detailed in outlining this method.
Up until now, the problem with options has been in getting a seller to accept one - most sellers do not want to take their property off the market until it actually sells. The author has overcome this hurdle by inserting a "kick-out" clause, which allows the seller top continue trying to sell his property. If a qualified buyer makes a legitimate offer, the seller then notifies the person holding the option, who now must either commit to closing on his option within 45 days, or forfeit his option - and the money he has invested (the risk that was mentioned earlier). Because of this kick-out clause, it would be wise if you are, if necessary, prepared to actually purchase the property long enough to resell it, or for rental purposes. But this is rarely necessary. In the event you are called upon to close early or forfeit, you could always choose to forfeit, especially if the bulk of your investment is your own labor and very little cash.
Here’s how it works (terms may vary):
Seller owns a $150,000 home that is, for the moment, vacant - he has already moved out. The home needs a bit of work, and you estimate that about $3000 and some hard work can increase market value to $160,000. Since the seller has nothing to lose, and everything to gain by accepting your one year option offer, you negotiate a purchase price of $145,000, putting up $1000 option money (applied to purchase price if you buy, but forfeited if you do not buy).
You immediately go in and do the necessary repairs - usually completed in about a month - and immediately place it up for resale at its new, higher value of $160K. When you find a qualified buyer, you simply exercise your option and double escrow. At closing, your buyer and his bank put up $160,000. From this, the escrow officer pays off your seller - $144,000 (you already gave seller $1000). That leaves you $16,000. After subtracting the $3000 you invested, your profit is $13,000 - more than 4x your investment.
Now let’s say you draw out $40,000 of the equity in your own home, and used this $40,000 as investment capital. At roughly $4000 per deal, you could work ten such deals simultaneously. Your $13,000 net is now $130,000 net!
You may notice that the author’s option agreement includes a clause that "quietly" states that, except for a few minor costs, the seller pays virtually all closing costs, which keeps your profits high, and makes it easier for you to sell the place. It also includes full right of possession, which means you could live there, if you need to, during the option period - or sublet it while you try to find a buyer. Furthermore, if your seller finds another buyer, and you are not ready to close, you are not obligated to complete the agreed upon repairs. Better yet, the "kick-out" clause provides you with a four month excluse option - seller cannot offer his property to another buyer for the first four months (this can be changed to three, etc., if seller balks). Seller’s biggest objection will be taking his property off the market. You can overcome this objection by telling him if a buyer comes along, he will still buy it - from you - and you will exercise your option, so he does not miss out on any sale. In fact, because the property has been fixed by you, it is even more likely to sell more quickly.
In many cases, you need not put up any option money (that $1000). Instead, you can first try using the value of the repairs as the consideration for the option. And if those repairs are all labor and no cash, you need not invest a dime into this project.
For those of you who have fix-up abilities, and access to just a small amount of cash, this could be your ticket to multiplying your cash quickly.
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