Today’s podcast is number 100, and this is one show I have really been looking forward to doing for a while. When I thought about what this show should be about, I started to really focus on all the things I learned throughout this 2 year process. I had so many experts on the […]
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Are you contemplating investing in real estate? But you don’t have enough money to accomplish this. In this article is a tip you can use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your very best wager is to find a property that the owner has great interest in offering it, whether because they are moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you maybe currently renting and thinking about using this approach perhaps the owner would be glad to assist you! There are some variations that could be used depending on you and your owner. Do they want the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The simplest way is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the first lender to assume the mortgage. If you can’t 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 get a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – 2 or 3 years. Rather than having the money sit down in a bank they can be getting a high interest over 2 or 3 years with the rest due in full at the end of the term.
When the term ceases you should be able to refinance the cost, or you can sell. Unless you hit an actual bad market the value of the property should have risen in that time.
Most mortgage lenders merely want to make a great investment. While your local bank may still shy away there are a lot of financial lenders that would like to make a deal. Financiers like real estate. The mortgage is mostly around 60-70% of the value of the property, so as long as they understand they get their money back in the value of the land if you default, they don’t care what sort of revenue 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 off the existing mortgage in the proceeds.
Now you can observe the entire picture. It is good that seller and buyer may work together. If they can’t wait for a sale, you can still give them their initial price with a little overall flexibility on their part.