Today’s show is all about planning for success in your REI business. As you know, planning is what you do before you “do anything”. It is also a crucial component of anyone’s success. A man (or woman) without a plan, is on a road going nowhere. It’s important to take the time periodically and […]
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Are you thinking of investing in property? However you do not have enough cash to accomplish this. Here is a tip you are able to use as long as the property seller is willing to negotiate with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your better gamble is to locate a land that the owner has great desire for selling, whether because of moving, divorce, or frustration with the people renting the place.
Actually, if you are currently renting and considering using this strategy perhaps the owner would be glad to assist you! There are several variations that could be used depending on you and your owner. Do they need the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The easiest way is to consider taking over their mortgage payments – 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 repayments while the property remains in the seller’s name.
You take over the original mortgage and make a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – two or 3 years. Rather than having the money sit in a bank they could be collecting a high interest over 2 or 3 years with the remainder due in full at the end of the investment term.
When the term draws to a close you need to be able to refinance the cost, or else you can sell. Unless you strike a genuine bad market the value of the property should have risen by then.
A lot of mortgage lenders merely need to make a good investment. While your local bank may still be lacking confidence there are plenty of financial lenders that would like to make a deal. Financiers like property investing. The mortgage is usually based on 60-70% of the value of the land, so as long as they understand they get their money back in the value of the land if you default, they don’t care what sort of income you make. Conclude the deal with a 2nd mortgage done with the seller. If you default they can still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can observe the complete picture. It is better that seller and buyer can work hand in hand. In the event that they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.