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EP #14: REAL ESTATE FINANCING OPTIONS

36, Podcast  Oct 18, 2020

When talking about real estate, there are different investment options available for an investor. Flipping is one type of investment in real estate. This is when one purchases a property intending to resell it as soon as possible.


Smart investors emphasise looking at two crucial things:


-Firstly, drawing up a written agreement with the seller of the property.


-Secondly, make sure that the buyer is ready. 


You have to make sure that the reselling process happens at the earliest opportunity and that you do not have to look for a re-buyer post the purchase. 


It is very important to follow a proper procedure for this. Locate a property that is selling below its value, contact its seller, make an offer and lock it, and resell that property to someone else. 


Note that once the offer is made, you have a certain amount of time (30/60days) to resell it to the re-buyer. 


Choices Available:


Options: After looking at the property, and options offer is made. The buyer has an opportunity to set a price at a future date. However, for the seller, it’s important to sell the property at a set price and time. Later, an agreement is made with the re-buyer who will be purchasing the property from you. The key here is to buy the right property, have the right seller, and the right re-buyer. 


Assignment of purchase: An offer is made and the buyer is either you or someone assigned. The person who is selling the property isn’t aware of who the buyer is. In this case, you have a capital gain by keeping the difference between the purchase price and the rebuying price.


One of the major advantages of this is that you don’t need to put your own money except for the initial deposit. However, the issue is that the seller may get annoyed as you are trying to get a property at a lower price. 


A very basic rule is to purchase the property that is undervalued and sell it later at a higher price. One needs to assess the location and purchase a property which has a low crime rate, nearby shopping facilities, and public transport services. If you are considering renting out your property, make sure the house is suited for tenants and the tenants are trustworthy. It is preferred to have a rental property that is near your residence and has low maintenance costs in order to avoid any hassle.


Final Note: 

Do a thorough research and decide what’s comfortable for you and then decide on which investment option you would go for.

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