A Creative Way to Buying Multiple Properties | real estate
I was recently working on a real estate deal that included multiple properties.
I have done many of those, and I wanted to share with you a “secret” way you can do it. This is one of several ways to do this type of deal.
Let’s use an example as follows:
You are buying 5 properties, all on different parcels, from same seller.
For the sake of this example, let’s say they are $100k each, for a total of $500k.
You are buying them for 65% of their existing value – so $65k each, for a total of $325k.
Here is what you should try to do: “Max out” the loans on as few properties as possible, and try to get the remaining “for free” – meaning unencumbered (no loans).
So with our example, if you can get the $325k against 4 properties, and get the 5th for free, that would be best.
How do you do that?
Get other people to buy the 4 properties with you (assuming they are good deals), and keep 5th for yourself – OR – you can buy the first 4 yourself and keep 5th with no loans.
So structure the $325k against the 4 first properties worth $400k (or 81.25%).
So whoever buys them is buying them at an almost 20% discount. You then get the 5th property for free.
What happens then? Simple. Refinance that 5th property and buy more!
Make sure to run this scenario with escrow (or title company) to show you how you can make this deal work, since seller’s concern would be “how do I know you are going to close on all 5 properties?” This is a valid concern. Easy to fix though. Talk to escrow (or title company).
Buying properties in packages can be VERY interesting!
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