I had the pleasure of being a guest on Andrew Holmes “Chicago Flipping” Radio show recently where we talked about probate investing. You know how I like probate investing! This show was definitely fun to do. Andrew is a great interviewer who likes to do a dive into the topic. One of the […]
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Are you thinking of investing in property? However, you don’t have enough money to accomplish this. Here is a tip you are able to 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 guess is to locate a land that the owner has great desire for selling, whether because of moving, divorce, or frustration with the people renting the place.
Actually, if you are currently renting and considering using this strategy perhaps your landlord would be happy to assist you! There are several variations that may be used depending on you and your seller. Do they want the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The easiest method is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the first lender to presume the mortgage. If you cannot get approved for an assumable mortgage you could 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 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 period – two or 3 years. Rather than having the money sit in a bank they could be getting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term draws to a close you ought to be able to refinance the cost, or else you can sell. Unless you struck an actual bad market the value of the property should have risen in that time.
Most mortgage lenders merely need to make a great investment. While your local bank could still be scared there are plenty of financial lenders that would want to make a deal. Financiers like property investing. The mortgage is usually around 60-70% of the value of the land, so as long as they understand they get their money back in the value of the property if you default, they do not care what kind of revenue you make. Conclude the deal with a 2nd mortgage created with the seller. If you default they could still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see the entire 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 could still give them their asking price with a little overall flexibility on their part.