Today’s reader Q & A is one that I get quite a bit, and that is “what is the perfect direct mail piece to use in my business”? My answer is, that depends. Ultimately the perfect direct mail piece is the one that get’s the seller’s attention. In the case of a letter, it’s definitely […]
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Are you thinking of investing in real estate? However, you do not have enough cash to accomplish this. 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 interested (or even understand) the concept outlined. Your best guess is to locate a land that the owner has great desire for offering it, whether because of moving, divorce, or frustration with the folks renting the property.
Actually, if you maybe currently renting and thinking about using this technique perhaps the owner would be happy to help you out! There are a few variations that may be used depending on you and your seller. Do they desire 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 obligations – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to assume the mortgage. If you can’t get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make obligations while the property stays in the seller’s name.
You take over the first mortgage and make a second 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 stay 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 ought to be able to refinance the cost, or you can sell. Unless you hit a genuine bad market the value of the property should have risen in that time.
A lot of mortgage lenders merely need to make a good investment. While your local bank may still shy away there are plenty of financial lenders that would wish to make a deal. Financiers like property investing. The mortgage is mostly 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 estate if you default, they do not care what sort of income 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 down the existing mortgage in the proceeds.
Now you can observe the entire picture. It is better that seller and buyer may work together. In the event they can’t wait for a sale, you can still give them their asking price with a little versatility on their part.