Every week in our real estate investing discussion forums investors share about the deals that they are working on or about how they just successfully closed on an investment deal. Often times all we hear about or even dream about are the big killer deals that net $50K+ – when in fact every day people just like […]…
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Are you thinking of investing in real estate? But you don’t have enough cash to do this. In this article is a tip you are able to use as long as the person selling the property 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 find a land that the owner has great desire for offering it, whether because they are moving, divorce, or frustration with tenants.
Actually, if you are currently renting and thinking of using this approach perhaps the owner would be happy to assist you! There are a few variations that could be used depending upon you and your vendor. Do they need the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The easiest way is to take over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to assume 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 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – 2 or 3 years. Instead of having the money sit down in a bank they can be getting a high interest over 2 or 3 years with the remainder due in full at the end of the term.
When the term ceases you should be able to refinance the cost, or you could sell. Unless you strike a genuine bad market the value of the property should have risen in that time.
A lot of mortgage lenders merely want to make a great investment. While your local bank could still be scared there are a lot of financial lenders that would wish to make a deal. Financiers prefare real estate. The mortgage is mostly around 60-70% of the value of the land, so as long as they know they get their money back in the value of the land if you default, they don’t care what kind of income 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, paying down the existing mortgage in the proceeds.
Now you can see the complete picture. It is good that seller and buyer can work together. In the event they can’t wait for a sale, you could still give them their asking price with a little overall flexibility on their part.