Real Estate Investing with John Alexander

Right now, what I want to do is cover what we can do as far as being creative on the buyer’s side. Here’s what you can do. Now this has always been available, but if you don’t know it existed, and most people don’t know that you can set stuff up like this, it’s a big problem or detriment to them, so once you understand this, it becomes a big dealmaker for yourself. You can actually give incentives to buyers to get them to go with you, even over anybody else.

By the way, this even applies to A-credit people, because I want you to imagine this for a second. Let’s say you’re A-credit. Right now if you’ve got A- credit and you go out and try to buy a house, and you go down to apply for a mortgage, depending on if you go stated or non-stated, you’re going to be pretty lucky if you get anywhere – you can consider yourself having made a good deal if you can get pretty much anywhere in the 6% area, 6-point-something area. So, maybe a 6.50%, all the way up to 6.75 or so, if you’re going stated. You have perfect credit…like 730 credit and you’ve got the income and everything else to match or at least you’re going stated. So, that’s where the interest rates are for A-credit. Now, imagine if you could offer 5.5% or even 5% interest to this same buyer. So, if you could advertise that in your ad or you state that to people as they come in if they’re A-credit, that you can give them a 5% effective rate, how much more would that go towards helping you sell that home, or competing against any other seller out there at that is selling to “A” credit buyers. It makes a nice big difference on the monthly payment, but it really won’t hit your bottom line too much if you do it the right way.

At the same time, while that’s not what I’m really going to zero in on, I’m going to zero in on today is still working with people with problem credit, and that’s really where we want to address this. Let’s say for example, our typical problem-credit buyer, if you can get them a decent rate or even a decent payment that they are satisfied with making, you obviously know you’re going to make more deals happen. We always have a lot of people coming out of rentals. They buy a house, so they move up a little bit bigger on their house, but now that the rates have creeped up on everybody, what’s happening is, now they’re having to pay more than they were paying for rent typically. Now, this wasn’t the case last year or the several years before that. That’s why you had so many people – it was so easy to bring them out of the rental market and get them into a house because their monthly payment actually went down as they went into a house.. So, now it’s changed. It’s different now, and you need to be aware of that. So, that helps you understand your marketplace and it helps you understand what’s happening here. Then, if we know how to still make that happen for the rental buyer, then we can cure their new problem and then we can make a lot of money. So here’s how we do it. If we know the payment’s going up or - it doesn’t really matter. It's whatever happens. If you have an approval on a buyer, really sub-prime, and let’s say it comes back, and it will come back, somewhere typically between 8 and 10, 8% to 10%. That can make a pretty hefty payment. So, let’s do an example. How can you get that down by 1 or 2 points to 7% etc?

Let’s say $150,000 and kind of get in the middle of the road here. 360 months at let's say 10% interest and we solve for payment, that’s $1,316.36. So, that’s their monthly payment and if they’re coming out of the rental market on the same kind of home, they might have been paying that or they might have been paying a little bit less. Well, with taxes – with principle and interest, it’s going to pop it up higher than that and it will be above generally where they were renting at. So now, what we do here, is we’ve got to probably offset this by about $300. If we can offer somebody a payment $300 less than this right here, we can probably lock up a lot of people, because now they can afford it. In fact, they probably can’t rent for that. So, here’s how we do it. Continued in the level 2 members area (Reducing the Payment for Buyers)