Today I have another reader question for you. The question was, “Can you acquire probate property using a lease option”? To answer this question, you need a little understanding of how probate works. When someone passes away, there are certain steps that have to be followed to settle an estate. The Simplified Probate Process The […]
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Are you contemplating investing in property? However you don’t have enough money 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 find a property that the owner has great interest in offering it, whether because of moving, divorce, or frustration with tenants.
Actually, if you maybe currently renting and considering using this technique perhaps the owner would be happy to help you out! There are a few variations that could be used depending on you and your owner. Do they want the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The easiest way is to take 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 may also try a ‘subject to’ assumption where you merely make payments 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. Instead of having the money sit 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 investment term.
When the term ceases you should be able to refinance the cost, or perhaps you could sell. Unless you strike a real bad market the value of the property should have risen in that time.
Most mortgage lenders merely want to make a good investment. While your local bank may still be scared there are plenty of financial lenders that would like to make a deal. Financiers prefare real estate. The mortgage is usually based on 60-70% of the value of the land, so as long as they understand they get their money back in the value of the estate if you default, they do not care what kind of revenue you make. Complete the deal with a second mortgage done with the seller. If you default they could eventually foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can observe the entire picture. It is good that seller and buyer may work hand in hand. If they can’t wait for a sale, you can still give them their initial price with a little overall flexibility on their part.