In the first few weeks of November 2008 there have been lower priced properties on the market. One was listed for below $200K, in city, with a small house. There was one photo of the lot, but the house was on a foundation.
What has happened is people who were holding properties while prices were going up are now selling them to get into something better. There are hundreds of properties owned free and clear or have small first position loans with deferred maintenance. You see these houses in nice neighborhoods that have never changed in years. In some cases there isn’t even a renter, the houses are just sitting there.
Whatever hope of future appreciation is fading and these sellers may even be looking for income. A tactic for controlling those properties could be to make an offer dedicating the rental income to the seller. You could be a property manager to do that, or just a buyer with the promise to cash out within three years.
One of the things I’ll post about later is lending standards. As lenders look at borrowers they will also be looking at the asset, property, they are lending on. In the 1980s I saw deals fall apart over peeling paint. Lenders in the next few years may care more about the condition than they do today, or in the past five years.
If you can present a plan to a seller of bringing a property back into reasonable condition, or improve it, they may consider that a down payment. I have done exactly that on two occasions, and probably should have done more. In the first case the seller started building the house on his lot next door, got old, and never finished. The second house was from an investor who bought side by side properties, rehabbed one, got tired, and out of money, then sold me the second triplex, on contract, no money down.
No money down I have addressed in the past and will again in the future. No money down usually means an investment. It could mean your time, but usually it’s your money, you just allocate it to the property instead of the seller. Back taxes are a good example, or mortgage payments. There is a guy who sells a program of paying back taxes to get a property free and clear for hundreds of dollars. One of those properties had a bright sunny picture but in the winter the entire house is covered with snow for a month or two.
We will address contracts for purchase at a later time. The important thing is that you look at problem properties as an opportunity for both you and the seller. If the seller has seen rampant appreciation in prices they want to capitalize on that. At the same time if they have let the property go in the mean time it’s not fair that some one should come in and pay retail for taking over the problems.
