Today’s show is one I know you’re going to love. My guest is Holly McKhann AKA “Hard Hat Holly” from southern California, and she is going to share how she managed to buy 100+ houses just by networking. Holly is a very successful rehabber. She is also a Realtor and the mom of 4. I […]
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Are you thinking of investing in real estate? However 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 along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your better gamble is to locate a property that the owner has great interest in selling, whether because they are moving, divorce, or they are frustrated with the folks renting the property.
Actually, if you maybe currently renting and thinking of using this strategy perhaps the owner would be happy to help you out! There are a few variations that can be used depending on you and your seller. 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 consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the original 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 obligations while the property remains in the seller’s name.
You take over the first 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 frame – two or three years. Instead of having the money stay in a bank they could be collecting a high interest over two or three years with the remainder due in full at the end of the term.
When the term ends you should be able to refinance the cost, or you can sell. Unless you struck an actual bad market the value of the property should have risen by then.
Most mortgage lenders merely need to make a great investment. While your local bank may still be lacking confidence there are lots of financial lenders that would wish to make a deal. Financiers like property investing. The mortgage is mostly based on 60-70% of the value of the property, 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 sort of revenue you make. Complete the deal with a second mortgage created with the seller. In case you default they can 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 better that seller and buyer can work hand in hand. In the event they can’t wait for a sale, you could still give them their initial price with a little overall flexibility on their part.