This is my column for this week from the Arizona Republic (permanent link).
Workable real estate deals may require even more creativity
I do a lot of work with buy-and-hold rental home investors, more and more of whom are able to come into Phoenix with all-cash offers. Poor me, I know.
But: I’ve been spending a lot of my time, lately, thinking about “triangle-trade” strategies — old-style funding mechanisms that we were happy to forget all about when money was easy.
So picture a buy-and-hold investor with 100% equity who wants the best deal he can get when he sells his former rental home. Why not do a lease-purchase instead of a straight sale? The investor can help his buyers accumulate a down-payment, perhaps working with them to improve their credit score at the same time. The investor gets a higher purchase price, the buyers get a lower monthly payment, everybody wins.
Or how about selling with a contract-for-deed? There are a lot of people out there with great incomes but lousy credit — more every day. If an investor — or ordinary homeowner — is willing to take on the risk of a carrying back a note, the home can sell now, rather than languishing on the market.
Or if the seller isn’t able to carry the whole mortgage, how about carrying back a second loan? If the seller has the equity, and if that will swing the balance with the buyer’s lender, it can make sense.
San Diego Realtor Don Reedy has come up with his own blast from the past: Parents help their kids get into homes by co-signing on the loan and helping with the payments, then share in the equity on resale.
Single people or single parents or childless couples could do the same sort of thing with a larger home: Go in on the home together as tenants-in-common, using their combined income to qualify for the loan, then paying the mortgage and sharing in the equity on a pro-rated basis.
Buyers are not in short supply, nor are homes available for sale. Creativity could make all the difference, going forward, in putting workable deals together.
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Merudh Patel says:
Great post. I just wanted to stop by and say this was inspiring. I’m looking into getting my own house and was thinking of some ways to do this. Thanks for the advice.
December 22, 2008 — 12:10 pm
myrtle beach condos says:
the whole real estate field is requiring more creativity now days
December 22, 2008 — 8:00 pm
Jeff Ellis says:
Isnt this right on. In todays challenging market it is imperative to try and crceate opportunity rather than to lay back and try the same old approach.
January 3, 2009 — 1:34 pm