When a Phoenix engineer started flipping real estate after the 2008 housing crash, his first few flips netted him about $126,000. Things were off to a great start. However, due… more
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Are you thinking of investing in real estate? But you don’t have enough cash to accomplish this. In this article is a tip you may use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your best gamble is to locate a property that the owner has great desire for selling, whether because of moving, divorce, or they are frustrated with the folks renting the property.
Actually, if you maybe currently renting and considering using this approach perhaps the owner would be glad to help you out! There are a few variations that may be used depending on you and your seller. Do they desire the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the first lender to assume the mortgage. If you cannot get approved for an assumable mortgage you may as well 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 get 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 three years. Instead of having the money sit in a bank they can be collecting a high interest over 2 or 3 years with the rest due in full at the end of the investment term.
When the term ceases you need to be able to refinance the cost, or you can sell. Unless you hit a real 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 lacking confidence there are plenty of financial lenders that would like to make a deal. Financiers like real estate. The mortgage is usually 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 property if you default, they don’t care what kind of revenue you make. Conclude the deal with a 2nd mortgage done with the seller. If you default they could eventually foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can observe the whole 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.