Cash Home Buyers Use Several Strategies to Purchase Your House
There are a number of things we may do with your house after you have sold it to us for cash. As a cash home buyer in Indianapolis, we may decide to fix up the property and sell it for a profit if we think it’s worth the time and money needed to invest into a complete rehab and flip. If we decide the property is better suited as a rental, then we may
decide to hold the property as a long-term rental. If we decide that the house you have just sold us doesn’t meet our criteria for fix and flip or rental income, then we may partner with another investor. They may wholesale the house to them so that they can hold it as a rental property. They may also use a fix and flip strategy to generate cash flow.
The property may be fixed and flipped.
First, the property in question may be fixed up after the transaction is complete. The property is inspected and fixed or updated as a means of improving its overall sale value. The programs that you see on TV make this fix and flip strategy look easy for cash home buyers. However, this is the furthest thing from the truth:
Home buyers incur a lot of risk when they decide to fix and flip a property. It can sometimes take up to six months for the property to be ready. We will completely rehab and update it to put it for sale on the retail market. Many sellers do not have the time or money needed to make this kind of investment. They would rather sell the house As-Is. This enables sellers to sell fast, and without inspection or financing contingencies. Many times sellers just want to move on with their lives without having to worry about investing a lot of time and money into rehabbing. They decide to list the property with a realtor. They hope it sells within 3-6 months.
The buyer may hold and rent the house
The buy and hold process entails a person buying a property with the intention of holding it for quite a while to generate taxable rental income on the house. That property will be held if the investor thinks the property will be cash-flow positive. It will also be held if the house fits the other criteria that the buy and hold investor has on houses they buy. Many times this strategy can be used when there isn’t as much equity in the house. Other times the Fix and Flip strategy is used. This is where there needs to be a lot of equity in the house that the investor is buying. Keep in mind that an investor using this strategy will not want to purchase a property that requires a large investment to get the house ready for the rental market. Be prepared as a seller to not receive as much cash as you probably would have. This may happen if the property is not currently rent ready.
Will the buyer wholesale my house?
A wholesale transaction may be used. It is one that must be used cautiously due to the possible risk that comes with it. Make sure that you are working with an honest and upfront homebuyer who is prepared to close on time after purchasing the house. A cash homebuyer who decides to wholesale your property will get your house under contract with a seller for the negotiated price. They will market the property free of charge for you to an end buyer. This is 100% legal and can be beneficial to all parties involved in the transaction.
To protect yourself as the homeowner, be sure that you are working with a wholesaler that is giving you full disclosure. They should also be able to close on time. You may lose your house if the buyer is not able to close by the agreed upon date.
Working with cash home buyers should be a positive experience. It should be a relatively quick and easy process that benefits all parties involved in the transaction. Research the homebuyer you have decided to work with and ask questions. If something doesn’t feel right, then seek out another cash homebuyer in your area.