Tony Hunt – Omaha, Nebraska
I believe the best way to learn the business of real estate investing is to hear how others have done it.
When these interviews were recorded, I asked Tom, the interviewer, to ask questions that would help the viewer see how these folks got started.
I wanted to hear the struggles, the successes and a clear path and explanation of what they had to do to make these deals happe…
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Are you thinking of investing in property? But you don’t have enough cash to do so. In this article is a tip you may use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your better wager is to find a property 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 technique perhaps the owner would be happy to help you out! There are a few variations that could be used depending on you and your vendor. Do they want the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The simplest way is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the first lender to presume the mortgage. If you cannot get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make payments 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 – 2 or 3 years. Instead of 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 ends you should be able to refinance the cost, or you can sell. Unless you hit a real bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely want to make a great investment. While your local bank may still be lacking confidence there are a lot of financial lenders that would like to make a deal. Financiers like real estate. The mortgage is mostly based on 60-70% of the value of the property, so as long as they know they get their money back in the value of the property if you default, they do not care what kind of money you make. Conclude the deal with a second mortgage created with the seller. In case you default they can eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the complete picture. It is better that seller and buyer may work hand in hand. In the event that they can’t wait for a sale, you can still give them their initial price with a little overall flexibility on their part.