Making Creative OffersPosted on February 28, 2013 by
Making creative offers is one of the most lucrative skills a real estate entrepreneur can master. Creative offers lead to creative financing and creative financing leads to faster financial freedom. I have built a portfolio of almost 400 units and I have never walked into a bank, qualified for a loan and put money down. I have a lot of bank loans now, but I took control of each property with some form of creative financing and then refinanced at a bank.
I did this by understanding one simple concept- “Solving people’s problems pays well!”
The first step to making offers that get accepted is to create an offer that solves one or all of these three problems; the seller’s problems, the properties problems, your problems.
You will need to gather a bit of information to effectively make your offer. Start by asking about the seller’s motivation to sell. Don’t always assume that money is the only motivation for a sale. Sellers often have other reasons for selling such as dealing with bad management or need to retire. Whatever the motivation is, finding a way to solve that person’s problem is key to writing an offer that gets accepted. A master lease works well for these situations.
If the property has problems then it is a distressed asset. You need to assess the physical situation at the property and get estimates for the needed repairs. Other problems (opportunities!) too look for are low occupancy, bad management and differed maintenance.
Now you need make the seller realize that they have two problems-
- Lenders are not lending on distressed assets
- This means they are looking for an all cash offer which will be much less than they’re asking.
Now you need to create an offer that will solve these problems (seller financing!).
If you are new to the business and don’t have much experience or you don’t have much cash, creative and seller financing is a great way to get started in the business. I started with one duplex and have grown to hundreds of units by identifying and solving seller problems. Look for ways that you can bring value to a deal by solving problems and make that clear in your offer.
Remember… the seller has a problem and you have the solution. Always have something to trade!