Woman: Pam Goodwin
Company: Goodwin Commercial
Place in the Industry:
Eleven years ago, Pam Goodwin made the leap out of “corporate America,” where she had been a very… more
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Are you thinking of investing in property? However, you don’t have enough cash to do so. Here is a tip you are able to use as long as the property seller is willing to negotiate with you.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your best wager is to locate a property that the owner has great desire for offering it, whether because of moving, a divorce settlement, or frustration with tenants.
Actually, if you maybe currently renting and thinking of using this approach perhaps the owner would be glad to help you out! There are several variations that could be used depending upon you and your vendor. Do they want the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The easiest way is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the first 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 repayments while the property stays in the seller’s name.
You take over the first mortgage and make 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 down in a bank they can be getting a high interest over 2 or 3 years with the rest due in full at the end of the term.
When the term draws to a close you should be able to refinance the cost, or perhaps you could sell. Unless you hit an actual bad market the value of the property should have risen by then.
A lot of mortgage lenders merely want to make a good investment. While your local bank could still be scared there are plenty of financial lenders that would like to make a deal. Financiers like real estate. The mortgage is usually around 60-70% of the value of the land, so as long as they understand they get their money back in the value of the land if you default, they don’t care what sort of money you make. Complete the deal with a 2nd mortgage created with the seller. In case you default they could still foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can observe the entire picture. It is good that seller and buyer may work together. If they can’t wait for a sale, you could still give them their initial price with a little overall flexibility on their part.