4 Ways To Build Equity Before You Even Own The Property!October 2, 2006 Create equity in a property before you even own it! Option Consideration For a typical renter, equity is never a consideration. A security deposit, the first month and the last month's rent is due at the agreement signing. If you take really good care of the property you may get most of the security deposit back when you move out. For renters about three months rent is expected at signing. A typical property buyer can be expected to have anywhere between 5% and 20% of the purchase price for a down payment on the property. How much is largely determined by your credit score and available resources. The closing costs can run between 3% and 6% of the purchase price. The available resources I referred to is where these costs are expected to be covered. Enter the "Tenant/Buyer".....a creation of the real estate market place. The T/B's position is between the typical renter and the typical buyer. Instead of a security deposit, the first and last month's rent, like a renter, the T/B uses "option consideration". This consideration can be as little as 2 to 3% of the purchase price, instead of 5% to 20% for a typical buyer. Here is the real beauty of the "option consideration". It can be as much cash as you have available above 2 to 3% because all of the money will go towards the down payment on your property when you exercise your option to purchase the property! Because your purchase price is set in advance, and you are the only person that can buy the property, the "option consideration" is non-refundable. The "option consideration" gives you the ability to use money your were going to spend anyway and still get credit towards the down payment on the purchase of your home! Monthly Rent/Lease Credits Would you pay "above market rent" for a property and be happy to do it? If you were to receive Monthly Rent Credits for paying above market rent you might be very happy. One of the ways to create or build equity in your home before you even own the property is to receive a percentage of the monthly rent, or lease payment, in the form of a credit towards your down payment on the purchase of the property. How much credit you may get is a function of how much money there is in the deal. It is not uncommon to get 20% to 40% of your monthly payment in created equity! In return for this credit, you get to take care of the property like you will when you own it officially, and you must make on-time payments to prepare you for the mortgage payment procedures. By the way, these two requirements also help improve your personal credit. Improved credit normally translates into better rates and terms on your subsequent financing. That's not bad. You get credit for money you were going to spend anyway. What a country! Get A Percentage Of The Property Appreciation You can create more equity before you officially own the property by properly structuring the purchase deal. By carefully studying the appreciation trends of your area and your property, you can easily build in 10% or more equity in the property! All of the talk about a "real estate bubble" simply makes us realize that the appreciation rates don't go straight up year after year. It is reassuring to note that there have only been two minor dips in the real estate appreciation trends in the last thirty years. Sweat Equity Rarely will you find a home you want to buy that is in "perfect condition". The current owner may not be able to make the improvements or repairs to the property for any number of reasons. That situation can represent a tremendous opportunity for you. You could ask for the owner to make the repairs or improvements, but a better alternative may be for you to ask for credit to make the improvements or repairs yourself. If that is agreed to, you can be assured the work will be done to your satisfaction, and you will be credited on your purchase price or down payment for doing it yourself. Landscaping, room additions, and finishing a basement are examples of high leverage improvements that can add thousands of dollars to the value of your home. If you no longer want to rent, but are not quite ready to buy the traditional way, you may be an excellent candidate to purchase a home as a Tenant/Buyer. If so, you now have at least four ways to build equity in your property before you even own it! Keith Donald is a professional in private real estate financing. He will consult individuals and small businesses in structuring private paper transactions and turning private paper assets into cash. Mr. Donald is available to assist you with the creation, purchase, and sale of real estate notes. He can be reached at: TDO Properties, LLC 8075 Mall Parkway Suite 320 Lithonia, GA 30038 404.713.1435 www.Cash-Now-Seller-Financing.com/contactus.html Comments On This Article, 4 Ways To Build Equity Before You Even Own The Property!, Are Welcomed! Your honest feedback, positive or negative, is appreciated. Just copy the headline, "4 Ways To Build Equity Before You Even Own The Property!, follow this link and paste the headline in the comments section along with your feedback. Unless you object, responses will be posted after editorial review.
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