Today we are going to talk about building an exceptional business with my friend Mike Hambright AKA the FLIP Nerd. Both of us are passionate about entrepreneurship. Entrepreneurs talk about how you build profitable business. But the real question is, how do you go about building an exceptional business as opposed to a business […]
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Are you thinking of investing in property? However you do not have enough money to do so. Right here is a tip you may use as long as the property seller is willing to negotiate with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your very best wager is to locate a land that the owner has great interest in offering it, whether because of moving, divorce, or they are frustrated with the people renting the place.
Actually, if you maybe currently renting and thinking of using this approach perhaps your landlord would be glad to help you out! There are several variations that may be used depending upon you and your seller. Do they desire the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The easiest method is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the original 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 obligations while the property remains in the seller’s name.
You take over the original mortgage and create a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – 2 or three years. Instead of having the money sit in a bank they could be getting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term ceases you should be able to refinance the cost, or you could sell. Unless you strike a real bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely need to make a great investment. While your local bank may still be lacking confidence there are lots of financial lenders that would want to make a deal. Financiers like real estate. The mortgage is usually based on 60-70% of the value of the land, so as long as they know they get their money back in the value of the land if you default, they don’t care what sort of income you make. Complete the deal with a second mortgage created with the seller. If you default they can still foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can see the complete picture. It is good that seller and buyer can work hand in hand. In the event that they can’t wait for a sale, you may still give them their asking price with a little versatility on their part.