Today’s reader question was one that I can honestly say I’ve never gotten before. The question was, “Can a financial planner profit from probate investing”? He was wondering if he could profit specifically as a financial planner. I had to tell him that I thought he was a little late to the game where that […]
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Are you contemplating investing in real estate? However, you do not 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 along.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your better guess is to locate a land that the owner has great desire for offering it, whether because they are moving, divorce, or they are frustrated with tenants.
Actually, if you are currently renting and thinking of using this approach perhaps your landlord would be happy to assist you! There are several variations that could be used depending upon you and your vendor. 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 repayments – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make obligations while the property stays in the seller’s name.
You take over the original mortgage and get a 2nd 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 two or three years with the remainder due in full at the end of the term.
When the term ends you should be able to refinance the cost, or you could sell. Unless you struck a real 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 could still shy away there are lots of financial lenders that would want to make a deal. Financiers prefare property investing. The mortgage is usually based on 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 kind of money you make. Conclude the deal with a 2nd mortgage created with the seller. In case you default they could still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can observe the complete picture. It is better that seller and buyer can work hand in hand. In the event they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.