Do you think this house would sell quickly?

If you’re a normal homebuyer, the statement I’m about to make may shock you.

Price is of little importance when it comes to making a profit in real estate.

“Oh no he didn’t,” I’m sure you’re saying right about now.

Understand this, price is just a number. Price is not the deciding factor on whether you’re going to make a profit in real estate investing or not. Price is something every day homebuyers worry about. For them, it’s about spending the least amount of money, usually looking at monthly payments, and hoping to close the deal with a little equity under their belt.

For a seasoned investor, their only concern is making a profit - that’s it, plain and simple. It doesn’t matter if you spend more or less money as long as the endgame results in an increase of net worth.

Good Terms Rule In Real Estate

Personally, I prefer getting good terms in real estate over a lower price - as long as the price isn’t too high. They allow you to be flexible with your property which usually results in an easier sell or easier rent.

Example

Let’s say Johnny wants to buy a home. He doesn’t have a lot of cash on hand and with gas prices and food costs increasing faster than his paycheck, he’s worried about his monthly payments.

He finds two houses for sale. Both houses are the same model, are in the same basic condition with similar upgrades, and sit adjacent to one another. He immediately notices the houses are offered for sale in two different ways.

House A’s Offer - Lower Price

• 3 Bed, 2 Bath, 2000 sqft living space, 6000 sqft lot, great condition, etc.
• Price: $170,000

House B’s Offer - Better Terms

• 3 Bed, 2 Bath, 2000 sqft living space, 6000 sqft lot, great condition, etc.
• Price: $210,000
• Owner financing available for full purchase price with no down payment and no closing costs.
• APR to be set at 3%

While finding such a deal as house B is rare, it illustrates the benefits of getting good terms vs. low price. If Johnny where to buy House A, he’d spend about $17,000 for a 10% down payment, $4,250 for closing costs, and end up with a monthly interest payment of around $935/month.

However, if he chose to purchase House B, he would spend $0 for the down payment, $0 for closing costs, and only $525/month in interest payments.

In case you didn’t do the math, that equals a $21,250 in savings up front and $410/month in payments.

In my experience, most Realtors aren’t well versed in the many methods of getting good terms outside of seller financing or sellers paying closing costs for buyers. Remember, Realtors are not trained investors. Ask your Realtor for advice, but nothing works better than researching methods on your own, because no one looks out for your best interest better than you.

Investing-wise, if you purchase a property for investment and are able to get a “low price” but the seller doesn’t budge on the terms, try flipping that house for an immediate profit. If the seller gives you great terms but a higher price, that may be a good rental. If you get both, you choose.

Questions?

1. Can you think of any other “good terms” ideas other than seller financing or seller paying the buyer’s closing costs?
2. Refer to the picture at the top of this page. Would you rather purchase that house for $600,000 in the traditional way or receive the higher price with great terms?