Motivated Sellers Make This the Perfect Time to Become a Real Estate Investor

If you’ve ever dreamed about investing in real estate, now is the perfect time to make that dream come true. It’s a real buyer’s market out there, with many sellers who are desperate to sell and lots of houses to choose from. Also, since the market isn’t likely to turn around for a few years yet, people who are uncertain about their plans for the immediate future are choosing to rent, not buy—this means there’s less competition for investors who are looking to buy.

If you have the means, you can take advantage of the down market and buy a property or two at rock-bottom prices. You can then rent the properties, make enough to pay your mortgage and put some extra money in your pocket each month, and then in the future when the real estate market turns around, you can re-sell the houses for a tidy profit.

A Down Market Means Motivated Sellers

There are many homeowners who are in true financial trouble. Often, they must sell because of a job transfer or divorce, or they are unable to continue paying their mortgage and foreclosure is looming. Finding sellers who need to sell is the key to getting a good deal.

You might feel that this is in some way taking advantage of homeowners who are in a bad position, but look at it from the other side. These people must sell to avoid financial ruin. By purchasing their home, you are saving them, not taking advantage of them. They need to sell, and you’re getting a house at a great price. It’s beneficial to both of you.

Finding Homes to Purchase

So how do you find these homeowners who are desperate to sell? Start with your local classified ads. Skip over the ads placed by Realtors and real estate companies. In a down market, people who truly need to sell will avoid Realtors because they don’t want to pay a commission on the sale.

Look for homes labeled “for sale by owner,” and search for keywords that indicate a need to close the deal as soon as possible, such as “must sell,” “vacant,” and of course, “motivated seller.”

If you have capital, either your own savings, or a loan secured through a lender, you can try placing your own ad in the newspaper. A headline like, “Will Buy Homes for Cash” should generate quite a few leads in this market.

This is a true buyer’s market and there are many, many homes from which to choose. Plan to make a lot of calls and field a lot of inquiries. If you’re willing to put in the legwork, you can find a real gem at an excellent price to get you started as an investor.

Financing the Deal

Before you begin searching for a home to purchase, you must be able to afford to close the deal. If you have good credit, it isn’t usually too much of a headache to find a lender who will give you a loan to buy an investment property. But what if you, like many people these days, have less-than-perfect, or even “bruised” credit? Can you still take advantage of the down real estate market and become a home investor?

The answer is yes. In fact, this is the best possible market for people with bad credit to get started as investors. That’s because desperate sellers are more willing to work with you directly, cutting out the middle-man banker, and provide “seller financing.”

The most advantageous form of seller financing is for you, as the buyer, to assume the seller’s existing bank loan. Ideally, the seller will sign over the title of the house to you, and you will make the payments on their loan. This puts the seller at a big disadvantage, since the loan is still tied to the seller’s credit report, and they can have very little recourse if you simply stop paying.

To protect the seller, you will need to visit a real estate lawyer and draw up a contract stating, at the very least, that you intend to pay each month. This is usually good enough for many sellers, because even if they have no claim to the property, at least they can sue you for non-performance.

Many mortgages have clauses that forbid this practice, but you must understand that there’s a difference between doing something that’s “against the rules” and doing something “illegal.” Assuming a seller’s loan is not illegal in any state. If it is forbidden by contract, the rule is only exercised at the lender’s option, and if you make your payments in time, the seller’s lender is unlikely to complain in this market.

If this doesn’t work for you, though, a land contract can be another good way to close the deal and still cut the bank out of the loop. In a land contract, the seller holds the title while you make the payments. You will have a legally binding contract that states that once you make a certain number of payments or pay a certain amount total, the seller will sign the title over to you and you will own the home outright. These are the least advantageous to you as the buyer, but if you have poor credit, it can be a good road to becoming a real estate investor.

A buyer’s market is the ideal time to get on the road to real estate investment. Remember to protect yourself and have all contracts reviewed by a real estate lawyer. Do the necessary legwork to find that diamond in the rough, and snap it up before prices begin to rise again.