Not many people are able to purchase properties, most especially real estate, in cash. Due to the volatile state of today?s economy, even those who live in relatively economically progressive societies find it hard to either let go of a large chunk of hard earned cash or secure a large amount of money. As such, most real estate transactions are not completed in one sitting, but over an extended period of time.

Those who have already established a solid credit standing in banks and other financing institutions will not find it hard to get a mortgage. However, quite a number of potential home owners, particularly young couples or young buyers, are not eligible to take out substantial loans from banks because they have yet to firmly establish their own credit ratings. This, however, does not mean that they have to miss out on having their own property. These buyers can still secure land of their own, but instead of getting a mortgage, they can consider getting their property by way of a Land Contract.

A land contract, also known as a Contract for Deed or an Installment Contract, is prepared when the seller or owner of a piece of real estate property allows a potential buyer to remit payment for the property over a specified period of time. This arrangement can be likened to what is commonly known as a bank mortgage, the only difference is that unlike properties purchased through mortgages, the legal responsibilities involved in owning a piece of property (taxes, etc) is retained by the seller, at least until the title is transferred to the new owner.

Like most contracts, the Land Contract should contain rudimentary information: such as the names and addresses of the parties involved, the description, address and price of the property being sold as well as the purchase price and the agreed upon payment terms. The contract would not be considered legal if this did not hold the signatures of the both the buyer and the seller. Real Estate Agents and lawyers, traditionally, were the only people capable of preparing Land Contracts between buyers and sellers; however, much of this has changed today. Nowadays, anyone can easily prepare Land Contracts as standard sets are readily available from various sources, including the internet.

Many are quite wary of information from the internet, as they can not be assured of the quality of the data they will be receiving. However, sources of downloadable forms, especially those that will be used for legal purposes, need to safeguard their credibility, thus the developers of such websites take great pains in ensuring that the information they are sending out are not only correct, but up to date as well. Users are assured that even with the addition of personal modifications in the standard format; the forms are still valid and will be recognized and honoured by any court of law.

For those who would want to be sure of the validity of the document they are preparing, the downloadable forms or contracts may be used as draft copies and these can be presented to lawyers or real estate agents for their verification and approval.

About The Author
This is article is brought to you by Gloria Smith at LegalHomeForms.com. Created by a former, licensed Real Estate Agent, LegalHomeForms.com was designed to offer instant access to the most sought after type of real estate forms. For the cost of what others charge for one land contract form, you can have instant access to over 60 downloadable real estate forms.

Posted in: on Tuesday, November 25, 2008 at at 6:37 AM 0 comments  

The two-note technique is another of the many ways to purchase property with no money down. It not only gets you into real estate with zero down, but it can also get the seller a good chunk of cash at closing. This is especially important if he has to pay off an existing mortgage loan on the property.

First, a definition is in order. What is a note? It is the debt instrument created to finance a real estate purchase. The most common example is a mortgage note. A bank loans you the money to buy a house, and you sign a note promising to repay, and you pledge the property as collateral. Other notes include land contracts, second mortgages, and any legal document obligating someone to repay a certain amount of money under specific terms.

You may be aware that a bank often sells it's mortgage loans to large funds that invest in such notes. Maybe you have had to start making the payments on your own home loan to some other place than the original lender. What you may not have thought of, is that if you someone owes you money on a property, you can sell that debt to an investor. More importantly, if you owe a seller on a real estate purchase, he can sell that note. This is crucial to understanding the two-note technique.

A Creative Way To Purchase Property

This creative way to purchase property may initially sound more complex than it is. Read through the following example a couple times, though, and you'll understand.

Suppose a seller is asking $350,000 for a rental property. He may only expect to get $335,000 in the end, right? Let's also assume he is willing to take payments on the property (much more common with investment properties than with homes). He hopes to make 7% on his equity instead of the 4 or 5% he'll make in the bank. The problem is that he needs to get at least $60,000 out of the deal in cash, to pay closing costs and to pay off the small mortgage balance remaining.

You, on the other hand, have to buy his real estate with no money of your own. You offer him $360,000, in the form of two mortgage notes, one for $280,000, and the other for $80,000. Amortized over 30 years, with 8% interest the payments on the first would be $2,054, and $587 per month on the second. You'll have total payments of $2,641 per month (be sure you still have cash flow).

As part of your offer, you arranged for the sale of the second note at closing for $60,000. Unfortunately that's all a note investor is likely to pay for an unseasoned note. The seller gets that $60,000 at closing though, which is what he needed, and he gets 8% on the other $280,000, which is better than he expected. He effectively got $340,000 for his property, which is also more than the $335,000 he was expecting.

You now make payments to the seller of $2,054 every month for 30 years, or until the balloon is due, if the seller insisted on structuring the loan with one. The note investor gets your other payment of $587 per month. You invested none of your own money. In fact, if the seller had been willing to take $55,000 cash at closing and a note for $280,000, effectively getting him what he expected, you could keep the other $5,000 cash from the sale of the note for yourself. That might cover your closing costs, making this truly no money down.

The numbers and exact structure of the offer will be different in each deal. You might have some cash. The seller may need more cash, so the second note will have to be for a higher amount. Interest rates, balloon payments, and your credit rating all affect what a note buyer will pay for the note as well. In any case, the lesson is that you can create cash out of seller financing, meaning you can purchase property with nothing down, or with less down.

Copyright Steve Gillman. For a Free Real Estate Investing Course, visit: http://www.HousesUnderFiftyThousand.com

Posted in: on at at 1:37 AM 0 comments