At the Think Realty National Conference & Expo 2017 our editorial staff hit the floor running with the popular Street Smart questions. In this recap, we will be sharing with… more
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Are you contemplating investing in real estate? But you do not have enough cash to do this. Right 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 better guess is to find a property that the owner has great interest in selling, whether because of moving, divorce, or frustration with tenants.
Actually, if you are currently renting and considering using this strategy perhaps your landlord would be happy to assist you! There are a few variations that could be used depending on you and your vendor. Do they need the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The easiest method is to consider taking 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 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 make a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – two or three years. Instead of 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 investment term.
When the term ends you ought to be able to refinance the cost, or else you can sell. Unless you hit a genuine bad market the value of the house 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 lots of financial lenders that would wish to make a deal. Financiers like 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 estate if you default, they do not care what kind of revenue you make. Complete the deal with a 2nd mortgage created with the seller. If you default they could eventually foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can observe the complete picture. It is better that seller and buyer can work together. In the event they can’t wait for a sale, you could still give them their initial price with a little overall flexibility on their part.