f you want to build a business that runs completely without you – if you want to extract yourself from the daily tasks that need to be done, but you still want to make sure everything gets done properly – you need to build systems.
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Are you contemplating investing in real estate? But you don’t have enough money to do this. 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 every seller will be interested (or even understand) the concept outlined. Your better gamble is to find a property that the owner has great desire for selling, whether because they are moving, divorce, or frustration with the people renting the place.
Actually, if you are currently renting and thinking about using this strategy perhaps the owner would be glad to assist you! There are some variations that can be used depending upon you and your vendor. 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 repayments – called ‘assuming’ the mortgage. You will need to be approved by the first lender to assume 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 remains in the seller’s name.
You take over the first mortgage and create 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 three years. Rather than having the money stay 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 term.
When the term ends you need to be able to refinance the cost, or perhaps you can sell. Unless you strike an actual bad market the value of the home should have risen by then.
A lot of mortgage lenders merely want to make a great investment. While your local bank could still shy away there are a lot of financial lenders that would like to make a deal. Financiers prefare 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 do not care what sort of revenue you make. Complete the deal with a second mortgage done with the seller. In case you default they can still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can observe the entire picture. It is good that seller and buyer may work hand in hand. In the event that they can’t wait for a sale, you may still give them their asking price with a little overall flexibility on their part.