Buy My Investment Properties With My Money — Seller is Lender: NO!

Posted January 9, 2008

Special Contribution Article

We see them all the time with these great lists of investment properties for sale. The prices appear to be good values and, hey - the seller will finance it for you. No credit check! All you need is a small down payment and the property is yours for 10% 12% or 14% interest. And here is a real money saver - you don’t even need to pay for the closing costs because they are built in and THE APPRAISAL IS INCLUDED.

Sound exciting? Enticing? Itching to jump at it? Not so fast there Esmeralda.

First of all NEVER and I mean N-E-V-E-R buy a real property without an appraisal and title check YOU paid for. This is the easiest and number one way to get ripped off. Just because the seller is a licensed real estate professional and the homes look nice and you can’t invest any other way doesn’t mean it’s not a good deal for you.

Secondly ALWAYS check your options on financing. You may be able to completely blow away the offer the seller is making to you. 12% is pretty darned high interest and what is your protection from them under the law if they are not a licensed lender? None, that’s what. If they decide to foreclose on you chances are you’ll lose the property, and your hard investment.

Let’s be honest here. If your credit is too bad to qualify for a real loan from a licensed lender chances are you do not have the ability or control to make the payments–at a higher rater–the seller is offering which means you’ll pay your down payment, make upgrades and repairs, put in sweat equity, then miss a payment and they’ll take your property back and sell it to the next sucker who comes along.

Finally never let your emotions make a business decision for you. ALWAYS go by the numbers. If you don’t have experience investing in real estate you need someone who can advise you and offer directions. Every deal needs as many eyes on it from OUTSIDE the seller as you can possible gather. Buying from a seller who is the financier who provides the appraisal is almost guaranteed to end you up in a really bad deal. Even if they don’t report your payments to help bolster your credit you can bet they will report if you are late or miss a payment.

Best advice: Run from the ONE STOP SHOP or bring your spreadsheets, calculator, your own appraiser, and let your attorney double check the deal all around. REAL ESTATE INVESTING IS SERIOUS BUSINESS and if you don’t treat it that way you’ll get the business, seriously!