Today I have another reader question for you. The question was, “Can you acquire probate property using a lease option”? To answer this question, you need a little understanding of how probate works. When someone passes away, there are certain steps that have to be followed to settle an estate. The Simplified Probate Process The […]
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Are you thinking of investing in real estate? However you do not have enough money to do this. In this article 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 interested (or even understand) the concept outlined. Your very best gamble is to find a land that the owner has great interest in selling, whether because of moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you maybe currently renting and considering using this technique perhaps your landlord would be happy to help you out! There are several variations that can be used depending upon you and your seller. Do they want the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The simplest method is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to presume the mortgage. If you can’t get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the first mortgage and make a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – two or three years. Rather than 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 ceases you need to be able to refinance the cost, or you could sell. Unless you struck an actual bad market the value of the home should have risen in that time.
Most mortgage lenders merely need to make a good investment. While your local bank could still be lacking confidence there are plenty of financial lenders that would want to make a deal. Financiers prefare real estate. The mortgage is mostly 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 property if you default, they don’t care what sort of revenue you make. Complete the deal with a 2nd mortgage done 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 entire picture. It is better that seller and buyer may work together. In the event they can’t wait for a sale, you may still give them their asking price with a little versatility on their part.