Woman: Sue Nelson
Company: REO Note Profits
Place in the Industry
Sue Nelson describes her real estate investing as “simple.”
“I buy apartment complexes, basically,” she said. Of course, over… more
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Are you contemplating investing in real estate? However you do not have enough cash to accomplish this. Here is a tip you may use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your best guess is to locate a property that the owner has great interest in offering it, 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 glad to assist you! There are a few variations that could be used depending upon you and your seller. Do they need the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The easiest method is to take over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to presume the mortgage. If you cannot get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make obligations while the property remains in the seller’s name.
You take over the original mortgage and get a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – two or three years. Instead of having the money sit down in a bank they can be getting a high interest over two or three years with the remainder due in full at the end of the term.
When the term ceases you should be able to refinance the cost, or else you can sell. Unless you hit a genuine bad market the value of the home should have risen in that time.
Most mortgage lenders merely need to make a great 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 mostly 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 don’t care what sort of income you make. Conclude the deal with a 2nd mortgage done with the seller. In case you default they could still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the entire 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.