Split funding is a fabulous way to engage in real estate investing. As long as your negotiating skills are up to the mark, this method will net you some quick profits with minimal effort.
The basis of the deal is that you offer a small sum as down payment to the seller and agree to pay the total balance within a specified period. Once this deal is secured, you can go about making the renovations needed to bring the property up-to-date. By doing this you increase the property value. Therefore, you can sell it for a higher price than purchased which ultimately nets you a handy profit.
The following example illustrates this process:
You come across a house that is selling for $60,000. You should consider how much it would cost you to renovate the house so that the value goes up. Let us say that it will cost you $5,000 to get the value up to $75,000. The first step is to negotiate the price to something you are comfortable with, say $50,000. Once this is through, you should offer the seller $6,000 up front and the balance $44,000 in 6 months. After he agrees to do this, you can complete the repairs, find a buyer for $75,000, sell it and pay back the original seller his lump sum. In this process, you can see that the profit margin is about $20,000 not bad for a little bit of smart negotiating.
Now the real reason why this is a great way to make money is that you can have several deals of this nature going on concurrently by virtue of sinking in only a small amount in initial investments. If you are worried about not being able to sell within the specified period, do not fret. This is where your negotiating skills come in; simply renegotiate by getting an time extension. Once you get the hang of this, you will find that this is an excellent way to invest in real estate.