Creative Real Estate Investing

by Mary Evans

Most of us have more time than money. Hundreds of vacant buildings have owners not imaginative enough to find the right tenants. Property increases in value when it is put to its highest and best use. Millions are made by those who understand real estate truth. Find and study some vacant buildings. Go through them. Think of logical users. Jot down your ideas. Now look through the yellow pages. They will stimulate a few more ideas.

Are you ready to make 20 or 30 cold calls to try to rent buildings you don’t own? Perhaps you will make 50 calls and get a bite. Now the excitement begins. What next?

What follows is easier than what has already been done, but it requires timing and knowledge.

Go to the owner of the building and try to get an option for 60 to 90 days. Tell him you have a potentially interested tenant and you need time to sign him up and arrange the financing. Chances arc the owner is sick and tired of his vacant building, and will give you an option gladly. Hotfoot it to the tenant for a letter of intent, stating the terms of the lease, then back to the bank to arrange interim financing, and then to the savings and loan for a per mortgage.

With all the ends neatly tied together, you call in your attorney and ask him to draw the formal lease and arrange (or the closing.

Say you find a 5,000 square foot building that had been vacant for several years. It was on a business corner, but it didn’t do any business. It was a $10,000 a year drain on the owner. He tried to sell it for $100,000, then for $80,000, then for $70,000. No takers.

You make 50 more cold calls. Finally about number 35 you get an answer which sends a warm glow through you. The voice says, “We’re looking for about 5,000 square feet in that area. Can we take a look at it?’ It is a Triple A tenant who is looking for office space. The tenant asks you if you will spend about $20,000 to remodel it for their needs. If so, they will pay $18,000 a year rent.

You then get a letter of intent from the tenant, and on the strength of it, you go to the batik to obtain an interim (mm to close. With the letter and interim financing, you go to the owner of the building and offer him $60,000 with $1,000 down and $59,000 in cash at closing.

The owner grabs the offer. It is interesting to note that the broker borrows $1,000 from the bank to make the down payment. The deal closes in 30 days.

The $20,000 remodeling money was financed on the strength of the tease from the Triple A tenant. You then go to a savings and loan association and arrange for an $80,000 permanent mortgage, but with a payout only after time remodeling. With the permanent $8

0,000 mortgage, you should have no trouble getting another $20,000 from the bank to make the tenant improvements.

When the tenant moves in, you should have (lie signed $80,000 mortgage and paid off the batik’s $80,000 interim financing. The deal stacks up as follows.

Fixed expenses are $14,000 per year, including t debt

service, and a rental of $18,000 a year leaves you a $4,000 a year profit tax-sheltered because of depreciation. You should have had none of your own money in the deal. The $4,000 per year income is worth $40,000.

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About the Author:
Mary Evans, Longview TX United States
thompsonpublishing@excite.com
Learn more about Real Estate Commerical Business
Let me tell you about myself... After spending years as a Business professional for several companies, I developed a passion for creating copy that resulted in successful marketing campaigns. I wanted to widen my field...so here I am, freelancing! I am an experienced, writer, researcher and teacher. I am dependable and can set goals and meet deadlines. I am well versed in the power of effective marketing which is evident in the writing, proofreading and editing of promotional literature, direct mail and website copy that I have produced. As you will see from my portfolio, I have created high quality work for clients including: Write for Cash, The Longview News-Journal, Nudges from God, The Real Estate Digest, the American Heart Association, KNUV, Leisure Host Publishing, Ironweed Press, and Article Insider. Click here

If all of the above sounds too complex, maybe you need to start with our beginners guide to investing

Published at Aug, 25 '05 ; read 600 times;

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