Today’s reader Q & A is one that I get quite a bit, and that is “what is the perfect direct mail piece to use in my business”? My answer is, that depends. Ultimately the perfect direct mail piece is the one that get’s the seller’s attention. In the case of a letter, it’s definitely […]
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Are you thinking of investing in real estate? But you don’t have enough money to accomplish this. In this article is a tip you are able to 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 very best gamble is to locate a property that the owner has great interest in offering it, whether because of moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you are currently renting and considering using this strategy perhaps the owner would be glad to assist you! There are several variations that can be used depending upon you and your seller. Do they desire the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The easiest way is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the original lender to presume the mortgage. If you can’t get approved for an assumable mortgage you may as well 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 frame – two or three years. Rather than having the money sit in a bank they can 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 ought to be able to refinance the cost, or you could 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 good investment. While your local bank may still be lacking confidence there are lots of financial lenders that would like to make a deal. Financiers prefare property investing. The mortgage is mostly 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 property if you default, they don’t care what kind of money you make. Complete the deal with a second mortgage created with the seller. If you default they could still 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 together. In the event they can’t wait for a sale, you can still give them their initial price with a little overall flexibility on their part.