National Conference & Expo :: Dallas, Texas
Education, Networking, and Purpose Came Together in Dallas
Attendees of the Think Realty National Conference and Expo in Dallas, Texas, April 29-30, 2017,… more
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Are you contemplating investing in property? But you do not have enough cash to do so. In this article is a tip you can use as long as the person selling the property is willing to negotiate with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your best gamble is to locate a land that the owner has great desire for selling, whether because they are moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you maybe currently renting and thinking about using this strategy perhaps the owner would be happy to assist you! There are a few variations that may be used depending on you and your owner. Do they desire the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The simplest method is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make repayments while the property stays 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 frame – two or 3 years. Instead of having the money stay in a bank they can be collecting a high interest over 2 or 3 years with the rest due in full at the end of the investment term.
When the term draws to a close you need to be able to refinance the cost, or else you can sell. Unless you hit an actual bad market the value of the property should have risen by then.
Most mortgage lenders merely want to make a great investment. While your local bank may still be scared there are a lot 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 land, so as long as they understand they get their money back in the value of the land if you default, they do not care what kind of money you make. Complete the deal with a 2nd mortgage created with the seller. In case you default they could eventually foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can observe the whole 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 could still give them their asking price with a little overall flexibility on their part.