The traditional strategy to purchase real estate is to put 20 percent down and get a mortgage for the balance owed. The only problem with this strategy is that you will eventually run out of money for the down payment. Savvy real estate investors have adopted a new strategy that allows them to purchase a property with no money down. This strategy is called purchasing a property subject-to the existing mortgage. There are some potential legal liability you can face if you purchase a property subject-to.
The rule of thumb in real estate investing is that for every 100 offers you present to sellers, 10 will be interested in the offer but only 2 will sell to you. The other 8 sold to somebody else. How do you get the other 8 to sell to you? You have to manage their expectations when you make them an offer.
Have you ever spent an hour talking to a seller and getting their verbal ok to sell their property to you, only to find out they sold to someone else that talked to them after you? Why was that investor able to close your deal? The primary reason is that the other investor was able to better manage the seller’s expectations and for that reason they were able to close the deal.
The first rule you learn when deciding to buy investment real estate is to protect your assets. No real estate investor will recommend that you operate your business as a sole proprietor. If you are a sole proprietor then your personal assets like your home, car and retirement accounts could be lost in a lawsuit. The best advice is to incorporate to limit your personal liability. The most common form of incorporation used by real estate investors is a Limited Liability Company or LLC. Some investors that flip properties will form a corporation. Now that you have your corporation, you decide to get financing to purchase properties and you find that banks will not let you get financing in the name of your corporation.