Today we’re going to talk about 4 ways someone can avoid probate even if their estate is not considered a “small estate”. Small Estates Avoid Probate If you’re not familiar with this term, estates that are classified as small estates can often go through a shortened probate process or possibly skip probate altogether. However in […]
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Are you contemplating investing in property? However you do not have enough money to do so. Here is a tip you are able to use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your best guess is to find a land that the owner has great interest in offering it, whether because of moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you are currently renting and thinking about using this strategy perhaps your landlord would be happy to help you out! There are a few variations that could be used depending upon 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 method is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may as well 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 create a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – two or 3 years. Instead of having the money sit down in a bank they could 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 ends you should be able to refinance the cost, or you could sell. Unless you hit an actual bad market the value of the house should have risen by then.
A lot of mortgage lenders merely want to make a good investment. While your local bank could still be lacking confidence there are lots of financial lenders that would like to make a deal. Financiers like property investing. The mortgage is usually around 60-70% of the value of the property, so as long as they know they get their money back in the value of the property if you default, they do not care what sort of money 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 off the existing mortgage with the proceeds.
Now you can observe the whole picture. It is good that seller and buyer may work together. In the event that they can’t wait for a sale, you can still give them their asking price with a little versatility on their part.