Forbes magazine has an interesting article with the above title: It goes into the pros and cons of selling to an investor. Since Central Cal Homes, Inc. does buy directly from Sellers as well, I thought it beneficial for prospective sellers to see the comments from an outsiders perspective.
The Pro’s are: 1) Flexible payment options. 2) Cash Offers. 3) Selling “As Is” and 4) Fast Closings
The Con’s are: 1) Investors do not need a license. 2) Plenty of Scam Artists. 3) Homeowners will likely sell below market.
I would like to comment on some of these:
Pro’s – Flexible payment option: Sellers often overlook this option. They believe that getting all cash is there best choice….when it may not be. If you’re simply going to take the money and invest it into something else, the cash option may not be your most profitable choice. When selling an investment property, you’ll be taxed on any profit made and have to recapture the capital gains. If you sell the property with seller carry back financing, you only pay taxes on a portion of the profit and depreciation recapture annually. Thus, you have more capital to invest with. If you have more capital to invest, you’ll have more opportunity for profit.
The other item is the % return you make on your capital. Typically, the investors I know are willing to pay between 5%-7% on seller carry back financing. This is much higher than you’ll see from a bank.
Con’s – Plenty of Scam Artists: I agree there are indeed plenty of scam artist. I would encourage you too use a reputable escrow company to insure you’re getting paid as agreed and that the documentation is prepared and recorded properly. If you are unfamiliar with real estate transactions, I’d encourage you receive guidance from a professional.
Central Cal Homes, Inc. has many business relationships with Sellers, Escrow Companies, Real Estate Agents, and other Vendors. We’re happy to provide referrals to answer your concerns. We’ve also included testimonials with some of the parties we done business with on our website….take a look!