Many
people fail to make profits in the property market
because
they think it takes a lot of expert knowledge,
experience,
and much capital. Now having capital of your own
will
always make life easier no matter what business you are
in,
but surprisingly, fortunes have been made by people who
have
used money which is not theirs.
In
order to raise capital you can always borrow, assuming
you
have a suitable credit rating, but better still, buy property
for
a third party using their money, and take a commission
from
them for your services.
You
need to be able to find properties, like repossessions,
which
you can buy at a far lower price than the market price.
Find
clients who are after a particular type of property. The
reason
why they will allow you to acquire property on their
behalf
is that you will be able to supply them at a substantial
discount
off market value.
Let
us say that you can obtain a property, a repossession
which
you can buy for $40,000, but you know the market
value
in that area for that type of property is more like the low
$50,000
mark. Get a professional values to value the property
and
survey it at the same time. The survey will save you
finding
out about any structural problem after it's too late,
and
the valuation will give you written confirmation of its value;
lets
say $55,000. The valuation and survey cost will be around
the
$125 mark.
You
now need to negotiate a contract with the mortgagee to
sell
you the property for $40,000, and find a buyer who is
willing
to buy the property off you for say, $52,000, giving the
purchaser
a saving of $3,000 off market price. A further
incentive
is to pay the purchasers 5% deposit making your
offer
far more attractive - in fact saving him around $5,600.
Nevertheless,
after your own legal fees, you will still come out
of
this transaction with around $6,000 profit. This is a popular
method
with people in the know, on making profit without any
capital.
Regarding
the $2,600 deposit, the buyer' lending bank or
building
Society will require this amount o be paid to them in
order
to release the full $52,000 to you, you will have to pay
this
amount, on behalf of the buyer, directly to his lender. If
you
do not have this deposit in cash, you can raise it using
methods
described in the other guides in this series, using
credit
cards. Ultimately you get this deposit back once the
transaction
for $52,000 is completed.
This
transaction is called a "back to back" deal, and the
selling
and buying from the original mortgagee is carried out
on
the same day. Therefore, you will not actually ever own the
property
- the deeds are transferred from the original owner
to
the new buyer and you, as the original owner's agent
simply
collect the profit.
Another
method is to raise finance through personal loans or
a
second mortgage on your home, if applicable, and buy the
property
for cash.
Property
auctions are a very good way to buy, usually
at a
price
well below true market value. You could use this method
to
obtain a property for a buyer who will commit himself to
buy
from you once you have secured the property.
At
auction you can secure a property for a deposit of 10% of
the
sale price, and after having paid the 10% you have
between
6 to 8 weeks to complete the sale. In this time you
arrange
for a final buyer to raise his finance of 90%, and buy
the
property off you. Your selling price is likely to be 20 -
30%
greater than the price you secured the property at. The
final
buyer's incentive is that he has purchased
a property at
10%
lower than the market price, and has no deposit to
make.
When
you acquire a property, do have it cleaned and any
minor
defects put right. Often, by having the property simply
decorated
will increase its value and make it far more
attractive
to a potential buyer. Get onto friendly terms with a
local
surveyor and negotiate a discount for putting work his
way
on a regular basis. Call into local estate agents and ask
them
to keep you informed of any suitable repossessions,
and
if there are points you need to know about, pick the
brains
of your estate agents and surveyors.
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