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 cash to do so. 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 every seller will be willing (or even understand) the concept outlined. Your best gamble is to locate a property that the owner has great interest in selling, whether because they are moving, a divorce settlement, or frustration with the people renting the place.
Actually, if you are currently renting and considering using this approach perhaps your landlord would be glad to assist you! There are several variations that could be used depending upon you and your seller. Do they need the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The simplest method is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the original 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 repayments while the property remains 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 frame – 2 or 3 years. Instead of having the money stay in a bank they can be collecting a high interest over 2 or 3 years with the rest due in full at the end of the term.
When the term ceases you should be able to refinance the cost, or you can 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 great investment. While your local bank may still be lacking confidence there are plenty of financial lenders that would like to make a deal. Financiers like property investing. The mortgage is usually 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 sort of revenue you make. Conclude 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 see the complete picture. It is better that seller and buyer can work together. If they can’t wait for a sale, you could still give them their initial price with a little overall flexibility on their part.