When people are first starting in this business, they seem to be slightly confused with what areas they should be focusing on. Now, you know that I teach the Single Family Triad™ (1. Wholesaling 2. Rehabbing and Selling 3. Rentals), but for the sake of time, I want to focus this article on where to […]…
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Are you thinking of investing in property? However, you don’t have enough money to do this. In this article is a tip you can use as long as the person selling the property is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your best guess is to locate a land that the owner has great interest in selling, whether because they are moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you are currently renting and thinking about using this approach perhaps your landlord would be glad to assist you! There are some variations that could be used depending on you and your owner. Do they desire the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The simplest method is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the original lender to assume the mortgage. If you cannot get approved for an assumable mortgage you may 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 original 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. Instead of having the money sit in a bank they can be getting a high interest over 2 or 3 years with the remainder due in full at the end of the term.
When the term ends you ought to be able to refinance the cost, or you could sell. Unless you struck an actual bad market the value of the home should have risen in that time.
Most mortgage lenders merely need to make a good investment. While your local bank may still be lacking confidence there are plenty of financial lenders that would wish to make a deal. Financiers like property investing. 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 property if you default, they do not care what sort of income you make. Conclude the deal with a 2nd mortgage done with the seller. If you default they can eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe 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 initial price with a little overall flexibility on their part.