How to Sell Your House Fast Using Mini Leveraged Buyout to Sell Homes Fast
In how to sell your house faster using the Secret of the Easter Ham we have promised to show you how to use strategies and tactics not usually used in real estate to sell your house faster and for more money.
The leveraged buyout may sound a little too powerful for selling a house, but there are elements that can work under certain conditions.
Although leveraged buyouts have been used in corporate real estate and small businesses for years, in recent times usage has expanded.
The term leveraged buyout became part of the language of American business in the seventies and eighties as large companies were taken over with a mixture of debt which would be repaid by the producing assets of the company being purchased.
The biggest takeover that I recall was RJR Nabisco in 1989 for $25 billion.
What we are talking about today is the reverse of that kind of leveraged buyout.
First we are working with relatively small transactions (a single family home) and we are looking at selling not buying against the will of the person who owns the asset.
The seller would like top dollar, a quick sale, and as much assurance as she can get that the transaction will work out safely.
Modern traditional real estate will not do that because of the factors mentioned in the first article in this series.
But, with the right mixture of people and house, the leveraged buyout can.
Consider a home in a nice neighborhood that was once worth and bought for $100,000 and now has bank owned homes in the same neighborhood selling (and becoming comps) at $40,000 and similar homes renting for $800 a month.
Seller would be happy getting $60,000 and thrilled if the sale happened within a month.
The seller finds a real estate investor with extensive rental holdings and rental experience and sells the house for no money down (for illustration, down payment is allowed) and agrees to take $333.
33 a month for 15 years from the buyer.
The buyer pays all closing costs and then rents the house for $800 a month.
Taxes, insurance, potential vacancy and repairs and marketing costs to run the rental probably works out to something like $300 a month, leaving the seller with free and clear $333 a month, the investor landlord with a variable amount each month averaging a little under $200 a month and with the potential of capital gains.
Obviously this number will vary a lot from area to area and will only work on lower priced homes where the rent to sale price ratio is favorable.
This will also only work with an experienced landlord who already has numerous homes so that the vacancies and repairs are spread over large numbers and where the seller is wise enough to allow enough potential profit for the investor so that he will be highly motivated to make it work and continue the payments to the seller.
There are a lot of people advertising that they buy houses and that is the first place to look for buyers, but you need to take one more step.
Answer the ads and talk to the buyer and get his name.
Then look him (her) up in the public records of the county where your home is located.
The person you want already owns 15 or more homes and has no foreclosures against him.
She may be the plaintiff in numerous legal actions such as small claims court and evictions.
She however will not the defendant in many cases.
Someone big enough to offer you the comfort of being paid that you want will probably have a few actions against them, but not many.
Then run the entire package by your attorney and he should be board certified for real estate, or at least experienced in real estate closings.
Another feature you may consider is holding a note instead of a note and mortgage, which is the method most people will suggest without thinking.
Sort of like cutting off the bottom two inches of ham.
The mortgage will allow you to get the house back if the buyer does not pay.
But, if I remember, you did not want the house in the first place and the foreclosure courts are so back logged today that getting the house back could take years and cost thousands in legal fees.
All of which could be years of not getting paid by the buyer.
Consider a "note only" and if not paid you have access to a variety of the buyers assets and while I am not an attorney, ask your attorney if there is extensive case law to defend default of the note.
Going back to the numbers, you will see that the interest rate on the note was zero and the sale price of the house was a loss.
Ask your tax expert if you have to pay income tax on a zero interest note and compare the $333 a month with the $100 a month (fully taxable) you would have received if you could have sold at $60,000 and put the money in the bank at 2 per cent interest.
Right buyer, right house, and the right seller all checked out by your attorney and tax woman and the Mini Leveraged Buyout cuts out a lot of middlemen and solves one problem with selling homes fast today.
More in the next installment of using existing financing to sell your house fast.
The leveraged buyout may sound a little too powerful for selling a house, but there are elements that can work under certain conditions.
Although leveraged buyouts have been used in corporate real estate and small businesses for years, in recent times usage has expanded.
The term leveraged buyout became part of the language of American business in the seventies and eighties as large companies were taken over with a mixture of debt which would be repaid by the producing assets of the company being purchased.
The biggest takeover that I recall was RJR Nabisco in 1989 for $25 billion.
What we are talking about today is the reverse of that kind of leveraged buyout.
First we are working with relatively small transactions (a single family home) and we are looking at selling not buying against the will of the person who owns the asset.
The seller would like top dollar, a quick sale, and as much assurance as she can get that the transaction will work out safely.
Modern traditional real estate will not do that because of the factors mentioned in the first article in this series.
But, with the right mixture of people and house, the leveraged buyout can.
Consider a home in a nice neighborhood that was once worth and bought for $100,000 and now has bank owned homes in the same neighborhood selling (and becoming comps) at $40,000 and similar homes renting for $800 a month.
Seller would be happy getting $60,000 and thrilled if the sale happened within a month.
The seller finds a real estate investor with extensive rental holdings and rental experience and sells the house for no money down (for illustration, down payment is allowed) and agrees to take $333.
33 a month for 15 years from the buyer.
The buyer pays all closing costs and then rents the house for $800 a month.
Taxes, insurance, potential vacancy and repairs and marketing costs to run the rental probably works out to something like $300 a month, leaving the seller with free and clear $333 a month, the investor landlord with a variable amount each month averaging a little under $200 a month and with the potential of capital gains.
Obviously this number will vary a lot from area to area and will only work on lower priced homes where the rent to sale price ratio is favorable.
This will also only work with an experienced landlord who already has numerous homes so that the vacancies and repairs are spread over large numbers and where the seller is wise enough to allow enough potential profit for the investor so that he will be highly motivated to make it work and continue the payments to the seller.
There are a lot of people advertising that they buy houses and that is the first place to look for buyers, but you need to take one more step.
Answer the ads and talk to the buyer and get his name.
Then look him (her) up in the public records of the county where your home is located.
The person you want already owns 15 or more homes and has no foreclosures against him.
She may be the plaintiff in numerous legal actions such as small claims court and evictions.
She however will not the defendant in many cases.
Someone big enough to offer you the comfort of being paid that you want will probably have a few actions against them, but not many.
Then run the entire package by your attorney and he should be board certified for real estate, or at least experienced in real estate closings.
Another feature you may consider is holding a note instead of a note and mortgage, which is the method most people will suggest without thinking.
Sort of like cutting off the bottom two inches of ham.
The mortgage will allow you to get the house back if the buyer does not pay.
But, if I remember, you did not want the house in the first place and the foreclosure courts are so back logged today that getting the house back could take years and cost thousands in legal fees.
All of which could be years of not getting paid by the buyer.
Consider a "note only" and if not paid you have access to a variety of the buyers assets and while I am not an attorney, ask your attorney if there is extensive case law to defend default of the note.
Going back to the numbers, you will see that the interest rate on the note was zero and the sale price of the house was a loss.
Ask your tax expert if you have to pay income tax on a zero interest note and compare the $333 a month with the $100 a month (fully taxable) you would have received if you could have sold at $60,000 and put the money in the bank at 2 per cent interest.
Right buyer, right house, and the right seller all checked out by your attorney and tax woman and the Mini Leveraged Buyout cuts out a lot of middlemen and solves one problem with selling homes fast today.
More in the next installment of using existing financing to sell your house fast.