What I’d like to shed some light on how to start a house flipping business where you are rehabbing and selling real estate investment properties. There are 3 parts to the Single Family Triad™: 1. Wholesaling Houses 2. Rehabbing and Selling Houses 3. Rentals Now, when most people think of flipping houses, they think of […]…
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Are you contemplating investing in real estate? But you do not have enough money to do this. Here is a tip you can use as long as the person selling the property is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your best wager is to find a property that the owner has great desire for offering it, whether because of moving, a divorce settlement, or they are frustrated with tenants.
Actually, if you maybe currently renting and thinking of using this technique perhaps your landlord would be happy to assist you! There are some variations that could be used depending on you and your vendor. Do they desire the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The simplest way is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the first lender to presume the mortgage. If you can’t 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 original 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 period – 2 or 3 years. Instead of having the money sit in a bank they can be collecting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term draws to a close you need to be able to refinance the cost, or perhaps you can sell. Unless you struck an actual bad market the value of the house should have risen by then.
A lot of mortgage lenders merely need to make a great investment. While your local bank may still shy away there are lots of financial lenders that would like to make a deal. Financiers like real estate. The mortgage is mostly around 60-70% of the value of the land, so as long as they know they get their money back in the value of the property if you default, they do not care what sort of money you make. Conclude the deal with a 2nd mortgage created with the seller. If you default they can still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the entire picture. It is good that seller and buyer can work together. In the event they can’t wait for a sale, you may still give them their initial price with a little versatility on their part.