Today I want to talk about success in probate investing, about your mindset, and how to finally get rid of your limiting self-beliefs. So what does finding success in probate investing have to do with your mindset? Everything! Your mindset will affect every interaction you have with those sellers whether that is in person, through […]
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Are you thinking of investing in real estate? However, you do not have enough money to do so. Here 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 interested (or even understand) the concept outlined. Your very best wager is to locate a property that the owner has great interest in selling, whether because they are moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you are currently renting and considering using this technique perhaps the owner would be happy to help you out! There are a few variations that may be used depending on you and your seller. Do they need the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the initial 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 payments while the property remains in the seller’s name.
You take over the first mortgage and create a second 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 can be collecting a high interest over two or three years with the rest due in full at the end of the term.
When the term ceases you should be able to refinance the cost, or perhaps you can sell. Unless you strike a real bad market the value of the house should have risen in that time.
Most mortgage lenders merely need to make a great investment. While your local bank could still be scared there are a lot of financial lenders that would want to make a deal. Financiers prefare real estate. 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 property if you default, they do not care what kind of revenue you make. Conclude the deal with a 2nd mortgage done with the seller. In case you default they could eventually foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can observe the entire picture. It is better that seller and buyer may 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.