Woman: Carrie Cook
Company: Preferred Trust Company, Ignite Funding
Place in the Industry
When Carrie Cook says success in real estate is earned – she knows what she’s talking about.… more
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Are you thinking of investing in real estate? But you don’t have enough money to do this. Right here is a tip you can use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your best wager is to locate a land that the owner has great desire for offering it, whether because of moving, divorce, or frustration with the people renting the place.
Actually, if you are currently renting and considering using this approach perhaps the owner would be happy to assist you! There are a few variations that may be used depending on you and your seller. Do they need the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The simplest way is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make obligations while the property stays in the seller’s name.
You take over the original mortgage and create a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – two or three years. Rather than having the money stay in a bank they can be collecting a high interest over 2 or 3 years with the rest due in full at the end of the term.
When the term draws to a close you need to be able to refinance the cost, or else you could sell. Unless you struck an actual bad market the value of the home should have risen by then.
Most mortgage lenders merely need to make a great investment. While your local bank could still be lacking confidence there are a lot of financial lenders that would like to make a deal. Financiers like property investing. The mortgage is usually around 60-70% of the value of the land, so as long as they understand they get their money back in the value of the property if you default, they don’t care what sort of income you make. Complete the deal with a second mortgage created with the seller. In case you default they can still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can observe the complete picture. It is good that seller and buyer may work together. In the event they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.