Real Estate Investors Are Sellers

By Unknown

Investing in single-family houses in San Diego these days is rather a bit different than it’s been in some while.

In the old days, investors were glad to shell out high prices and to subsidize monthly negative cash flow since they felt compellingly that prices were going to climb far quicker than the negative cash flow would eat away at their cash.

In the aftermath of the subprime meltdown, those days are nothing greater than a faint memory.

Today’s smart investor understands that if a home doesn’t yield a positive cash flow each month; together with a return on the cash down payment, there is actually not much point in owning the home.

The explanation for this is that most of the investors I talk to don’t consider that prices are going to increase any time soon….and why would they? The unemployment rate is approximately 15%, the world economy is in recession, California is bankrupt, the alarming pile of foreclosures is titanic, and the quantity of mortgage debt that is due for an interest rate reset in the next 24 months is bigger than what we saw all through the sub-prime debacle, and a good number of these properties will possibly end up in foreclosure as well.

Optimistic image, isn’t it?

Now, with that said, prospect still exists for those sharp enough to take off and look for it.

For instance, reflect on the investor that bought rental properties 20 or so years prior.

Odds are, their houses are paid off and today’s market price is well above what they paid so many years previously. What has happened throughout that time? The investor has gotten older and the home is probably in need of work.

As investors get older and more affluent, they are less liable to want to continue to be occupied in managing and repairing houses. Their time has turned into their most cherished asset and they already have sufficient money to meet their desires. The mixture of these two things makes them prepared as a prospective seller.

The key is to construct a transaction that involves seller financing. By doing so, the selling investor can continue to receive the monthly income to which they have grown accustomed and they get to exonerate themselves of the bother of managing the home. From a tax angle, instead of being faced with a steep tax bill when they sell, the selling investor can now stretch the tax bill on the duration of time they are being paid earnings from the buying investor.

For the buying investor, the arrangement is equally gripping. Rather than having to go to a pretender lender (an institution), the buyer can reach a deal directly with another person. This results in a contract that ordinarily involves only a small down payment, a tolerable interest rate, and heaps of flexibility in the future.

The final result of a transaction like this sees both investors better off than they were previously, but for very unique personal reasons.

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