Do you own a fixer property and want to sell, but don't think you can get what you need out of it? You have two options. One is you can spend thousands and fix it up yourself, but if you need money out of the sale, then more than likely you don't have the money to fix up the property. The second way is the way to net you 10-15% above the present appraisal value without spending any more money.
I work with investors that love fixers, but they need to make money on the property. The only way to do that is if once they fix up the property it can sell for more than they put in to it. When most investors purchase a fixer property they think about how much it is going to cost to fix up and not how much it is going to cost to re-sell it or how much they are paying in monthly mortgage while they are remodeling. Then once they do sell it, they forget about capital gains tax and lose thousands more. What they do is offer the owners of the fixer property the current appraised value and have the owner carry a contract for 6-8% which is better than a bank will offer them.
Let us look at an example of how this would work. If you own a fixer property that is appraised at $200,000 after the fix up the property would be worth $300,000. My investor would offer you the full $200,000 at 7% in an interest only loan for two years. This is important, he wants to own the property for two years to avoid capital gains tax and I will explain how he does that shortly. If you were to sell the property for $200,000 with a traditional agent you would pay between $10-12 thousand in commission. Netting you only $188,000. Now if I were to come to you and put your house up for sale to one of my buyers, they would offer you $200,000 at 7% in an interest only loan for two years. After paying 6% commission to me on the $200,000 you at the end of two years would net $215,724. Sound a little better now doesn't it?
My investor usually fixes up the property in less than 3 months and then lease-options it to another buyer immediately for a two year period at the $300,000 price. The reason he doesn't sell it immediately is because in order to do a 1031 exchange and avoid the capital gains tax he has to own the property two years. That is the reason for the two year contract with you and the two year lease with the new buyer. At the end of the two year period he can have the new buyer refinance and he pays you the remaining balance of the loan, and because it was an interest only loan, you still get the full $200,000 at the end of the two years. He can then take his profit and put it into another fixer up property, without having to pay tax on it.
I recently sold one fixer property in less than and hour and netted the owners $24,000 more than the appraised value and saved the buyers $45,000 in taxes and interest payments. It truly is a win-win for everyone involved.
Don't let your Realtor tell you that you can sell your fixer up property quickly and for top dollar because of its condition. Most don't understand about owner financing and are not willing to learn how you can make you more than the appraised value for your home. For more information on how you can make money from your fixer property feel free to contact me anytime.
Respect Realty LLC (Expect More)
At Respect Realty, LLC our agents believe in 100% dedication to client satisfaction. We specialize in property and land acquisition around the Portland Metro and Vancouver, WA area. We delight in working with first time home buyers and sellers to guide them from start to finish. Our doors are always open and we are always happy to assist you with your real estate questions.
Reach out today, we look forward to talking with you!
Todd Clark and Seraina Aguayo (Owners of Respect Realty)
Respect Realty LLC (Expect More)
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