You can learn more about Gaylene Lonergan and her law practice and reserve your spot at the “Dallas Market Insights” panel at the Think Realty Expo on April 29, 2017… more
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Are you thinking of investing in property? But 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 interested (or even understand) the concept outlined. Your best gamble is to locate a land that the owner has great desire for selling, whether because of moving, divorce, or frustration with tenants.
Actually, if you are currently renting and thinking about using this technique perhaps your landlord would be happy to help you out! There are some variations that could be used depending on you and your vendor. Do they want the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The simplest way is to consider taking over their mortgage obligations – 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 may also try a ‘subject to’ assumption where you merely make repayments while the property stays 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 period – 2 or three years. Rather than having the money sit in a bank they can be collecting a high interest over 2 or 3 years with the remainder due in full at the end of the investment term.
When the term ends you should be able to refinance the cost, or perhaps you can sell. Unless you hit an actual bad market the value of the property should have risen in that time.
Most mortgage lenders merely need to make a good investment. While your local bank may still shy away there are a lot 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 understand they get their money back in the value of the land if you default, they do not care what sort of income you make. Conclude the deal with a second mortgage done with the seller. In case you default they could eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can see the whole picture. It is good that seller and buyer can work hand in hand. In the event that they can’t wait for a sale, you could still give them their asking price with a little overall flexibility on their part.