I have been a real estate investor in Dallas, Texas for over 10 years, and just like many of you, I started part-time. Now I’m a full-time investor. Many investors… more
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Are you thinking of investing in real estate? But you don’t have enough cash to do this. In this article is a tip you may 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 better wager is to locate a land that the owner has great interest in selling, whether because they are moving, divorce, or they are frustrated with tenants.
Actually, if you are currently renting and thinking of using this technique perhaps your landlord would be glad to help you out! There are a few variations that may be used depending on you and your owner. Do they need the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the first lender to assume the mortgage. If you cannot get approved for an assumable mortgage you could 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 create a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – two or three years. Instead of having the money stay 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 need to be able to refinance the cost, or you can sell. Unless you hit an actual bad market the value of the property 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 plenty of financial lenders that would want to make a deal. Financiers prefare property investing. The mortgage is usually 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 income you make. Conclude the deal with a second mortgage done with the seller. In case you default they can eventually foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can see the entire picture. It is better that seller and buyer can work together. In the event that they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.