In September, Ben Harris, head of investor relations for Origin Investments, shared the approach that enabled Origin to raise over $4M of capital online in a single week.
Ben walked through the keys to building trust with investor’s online …
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Are you contemplating investing in property? However, you do not have enough cash to accomplish this. Here is a tip you may 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 very best gamble is to locate a land that the owner has great desire for selling, whether because they are moving, divorce, or frustration with tenants.
Actually, if you are currently renting and considering using this technique perhaps your landlord would be happy to assist you! There are several variations that may be used depending upon you and your seller. Do they desire the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The simplest way is to take over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the original lender to assume the mortgage. If you cannot get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make repayments 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 could be collecting 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 could sell. Unless you hit a real bad market the value of the home should have risen in that time.
A lot of 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 wish to make a deal. Financiers prefare real estate. The mortgage is mostly 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 do not care what kind of revenue you make. Conclude the deal with a second mortgage created with the seller. In case you default they can eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can see the complete picture. It is good that seller and buyer may work hand in hand. In the event that they can’t wait for a sale, you can still give them their initial price with a little overall flexibility on their part.