My guest today is Cally Wood Doyle from South Florida who is a Realtor and investor. Cally is a great example of someone that has managed to successfully combine her investing business with the retail side of real estate. She has become an expert in working in the “fringe areas” outside of the big cities […]
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Are you thinking of investing in property? However you don’t have enough money to accomplish this. Here 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 wager is to find a land that the owner has great interest in selling, whether because of moving, divorce, or frustration with the folks renting the property.
Actually, if you maybe currently renting and thinking about using this technique perhaps the owner would be happy to help you out! There are a few variations that may be used depending upon you and your seller. Do they need the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The easiest method is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the original lender to assume the mortgage. If you can’t get approved for an assumable mortgage you could also 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 get a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – 2 or 3 years. Rather than having the money sit in a bank they could be getting a high interest over two or three 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 hit 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 could still be scared there are lots of financial lenders that would want to make a deal. Financiers like real estate. The mortgage is usually around 60-70% of the value of the property, so as long as they know they get their money back in the value of the estate if you default, they don’t care what sort of income you make. Conclude the deal with a second mortgage done with the seller. If you default they could eventually foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the complete picture. It is better that seller and buyer can work hand in hand. If they can’t wait for a sale, you could still give them their initial price with a little overall flexibility on their part.