The real estate investor who raised more than $2.1 million in just under three months after being “cut off” from the banks who had been lending on his projects will… more
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Are you contemplating investing in property? However you do not have enough cash to accomplish this. Right here is a tip you can use as long as the person selling the property is willing to negotiate along.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your very best guess is to find a property that the owner has great desire for selling, whether because they are moving, divorce, or frustration with the folks renting the property.
Actually, if you maybe currently renting and thinking about using this approach perhaps the owner would be glad to help you out! There are several variations that may be used depending upon you and your seller. Do they want the market price or are they just desperate to get out of 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 initial lender to presume 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 remains in the seller’s name.
You take over the first mortgage and get a 2nd 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. Rather than having the money stay in a bank they could be collecting 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 you could sell. Unless you hit a genuine bad market the value of the house should have risen by then.
Most mortgage lenders merely need to make a good investment. While your local bank may still be lacking confidence there are lots 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 property if you default, they do not care what sort of revenue you make. Conclude the deal with a 2nd mortgage done with the seller. In case you default they could still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can observe the complete picture. It is better that seller and buyer may work hand in hand. If they can’t wait for a sale, you could still give them their asking price with a little versatility on their part.