Real Estate Investing is all about negotiation. Sometimes even the price we set upfront for a rehab flip deal can be part of our negotiation strategy. Think about that a bit….. Or perhaps you are a real estate investor looking for a few wholesale deals and keep getting your low ball offers shot down. There […]…
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Are you contemplating investing in real estate? However you do not have enough money to do so. In this article is a tip you are able to 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 better guess is to locate a property that the owner has great desire for offering it, whether because they are moving, divorce, or frustration with the folks renting the property.
Actually, if you are currently renting and thinking about using this approach perhaps your landlord would be happy to help you out! There are a few variations that could be used depending upon you and your seller. Do they want the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The simplest way is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume the mortgage. If you can’t get approved for an assumable mortgage you could 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 second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – two or three years. Rather than having the money sit down in a bank they can 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 ends you ought to be able to refinance the cost, or perhaps you could sell. Unless you hit a genuine bad market the value of the property should have risen by then.
A lot of mortgage lenders merely want to make a good investment. While your local bank could still be lacking confidence there are plenty of financial lenders that would like to make a deal. Financiers prefare property investing. The mortgage is mostly based on 60-70% of the value of the property, so as long as they understand they get their money back in the value of the estate if you default, they don’t care what sort of revenue you make. Conclude the deal with a 2nd mortgage done with the seller. In case you default they can still foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the whole picture. It is better that seller and buyer can work together. In the event they can’t wait for a sale, you may still give them their initial price with a little versatility on their part.