Today’s show is on building wealth through turnkey rentals. My guest is Chris Clothier of Memphis Invest. Chris is part of a very successful family owned business. Today you are going to learn how you can build wealth over time with rental property, and how to do that without ever picking up a paintbrush You […]
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Are you contemplating investing in property? However, you do not have enough cash to accomplish this. In this article is a tip you may use as long as the person selling the property is willing to negotiate with you.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your very best gamble is to find a property that the owner has great interest in selling, whether because they are moving, divorce, or frustration with tenants.
Actually, if you are currently renting and considering using this approach perhaps your landlord would be happy to assist you! There are some variations that could be used depending on you and your vendor. Do they want the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The easiest way is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the first lender to assume the mortgage. If you can’t 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 first 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 frame – two or three years. Instead of having the money sit in a bank they could be getting a high interest over 2 or 3 years with the rest due in full at the end of the term.
When the term ends you should be able to refinance the cost, or else you could sell. Unless you strike a genuine bad market the value of the home should have risen by then.
A lot of mortgage lenders merely need to make a good investment. While your local bank could still shy away there are a lot of financial lenders that would want to make a deal. Financiers prefare real estate. The mortgage is usually based on 60-70% of the value of the land, so as long as they know they get their money back in the value of the land if you default, they do not care what kind of income 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, settling the existing mortgage in the proceeds.
Now you can see the complete picture. It is better that seller and buyer may work together. If they can’t wait for a sale, you may still give them their asking price with a little versatility on their part.