Is Private Mortgage Note Investing Safe?

Source: https://www.reiclub.com/realestateblog/is-private-mortgage-note-investing-safe/

Investing in Private Mortgage Notes are very safe investments. In addition to the mortgage lien, these properties are also backed by Title and Hazard policies. If the property burns down, or if there is a problem with the title, then the investor recoups their money through these policies. Finding Private Mortgage Notes There are firms […]…

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Are you thinking of investing in real estate? But you don’t have enough cash to do this. Right here is a tip you can use as long as the property seller is willing to negotiate with you.

To be fair, not all sellers will be willing (or even understand) the concept outlined. Your best wager is to locate a property that the owner has great desire for selling, whether because of moving, divorce, or they are frustrated with tenants.

Actually, if you maybe currently renting and thinking of using this approach perhaps your landlord would be happy to assist you! There are several variations that can be used depending upon you and your vendor. Do they want the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?

The easiest method is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the first 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 repayments while the property stays in the seller’s name.

You take over the original 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 period – two or 3 years. Instead of having the money sit in a bank they can be collecting a high interest over 2 or 3 years with the remainder due in full at the end of the term.

When the term draws to a close you should be able to refinance the cost, or you could sell. Unless you struck an actual bad market the value of the house should have risen in that time.

A lot of mortgage lenders merely need to make a great investment. While your local bank may still be scared there are plenty of financial lenders that would want to make a deal. Financiers prefare property investing. The mortgage is usually 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 estate if you default, they don’t care what kind of revenue you make. Conclude the deal with a 2nd mortgage created with the seller. In case you default they could still foreclose on the property and sell it, paying off the existing mortgage with the proceeds.

Now you can see the entire picture. It is good that seller and buyer can work hand in hand. If they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.

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