Have You Ever Wondered If You Could Do Staged Payment Deals When Buying Property?
Copyright (c) 2010 Katie Sylvester
Have you found it more diffficult to do good BMV deals since lenders dropped their LTV's from the dizzy heights of 2008? We have which meant we were struggling to find good solutions for the countless sellers contacting us looking for some answers.
After scratching our heads for a while the answer was obvious - what was stopping us pay a greater price for the property than other Investors would, just splitting that across two payments? We knew that by being able to offer more value to our customers that more people would want to work with us.
This was the easy bit, then we neeed to find a way to structure the transaction so that Vendors have faith and confidence that they will see their second payment, and a process they can follow should we fail to meet our obligation! Most importantly the solution needed to be easy to explain as from our experience, complicated processes only serve to confuse the vendor and scare them off. Well we couldn't find one we liked so we got a solicitor to draw one up for us.
As with most things, the more solutions you can offer a vendor, the more likely you are to become memorable and to win their trust. We know that in today's climate, we have to be securing a minimum of 28% discount in order for the deal to be of interest to most Investors. Naturally most vendors want to achieve the highest price for their property, so in many cases this means that they are either unable, or unwilling to take such a large discount.
Staged Payment deals have really been maximising our cash-flow over 2009 and will be much used through by us through 2010, but they are not new concepts. In simple terms, its one payment upon completeion and another at a time in the future that both parties are happy with - typically 3-7 years. It's a bit of a hybrid between BMV and a Lease Option, with the key difference that you actually own the property from day one.
This methodology has enabled us to buy properties in locations that we may not previously have considered, as we only look at these purchases on a 3 year plan - ie: buy now and sell with exit strategy. We feel the location becomes less relevant as long as the property will make good cash-flow during the term. Whilst we know the property needs to be managed during this time, we can factor in those costs into the overall ROI for the opportunity - we hold the property until we sell so that we can release the equity (discount) we have agreed. To summarise, we have a proven system that offers full legal protection for both the buyer and the seller which will mean you can do more deals.
About the Author
For more info on how you can use the Staged Payment Methodology today to do more deals and to increase your property portfolio, go now to http://www.everycloud.org/wordpress/stagedpayment/ . Katie Sylvester is a co-founder of EveryCloud and a full time Property Investor & Landlord.
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