0056 Audience Question: Should You Purchase A Tenant Occupied Property

Source: http://youtu.be/62H3ZF4wcLo

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Are you thinking of investing in real estate? However, you don’t 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 along.

To be fair, not all sellers will be interested (or even understand) the concept outlined. Your best guess is to locate a land that the owner has great desire for offering it, whether because they are moving, divorce, or they are frustrated with the people renting the place.

Actually, if you are currently renting and considering using this strategy perhaps your landlord would be happy to help you out! There are some variations that may be used depending on you and your owner. Do they need the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?

The simplest 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 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 first mortgage and make a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – two or three years. Rather than having the money sit in a bank they can be getting a high interest over two or three years with the rest due in full at the end of the investment term.

When the term ends you need to be able to refinance the cost, or else you could sell. Unless you strike an actual bad market the value of the house should have risen in that time.

A lot of mortgage lenders merely want to make a good investment. While your local bank may still be scared there are plenty of financial lenders that would want to make a deal. Financiers prefare real estate. The mortgage is usually around 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 do not care what sort of income you make. Conclude the deal with a 2nd mortgage created with the seller. In case you default they could still foreclose on the property and sell it, paying off the existing mortgage with the proceeds.

Now you can see the entire picture. It is good that seller and buyer can work together. In the event that they can’t wait for a sale, you can still give them their initial price with a little versatility on their part.

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