“Live where you want, but invest where it makes sense.” Marco Santarelli, founder and CEO of Norada Real Estate Investments, is known for saying. Santarelli, who invests in cash-flowing turnkey… more
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Are you contemplating investing in property? However you don’t have enough money to do this. Here is a tip you can use as long as the person selling the property is willing to negotiate with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your best gamble is to locate a land that the owner has great desire for offering it, whether because of moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you are currently renting and thinking of using this strategy perhaps the owner would be glad to help you out! There are some variations that may be used depending upon you and your seller. Do they desire the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The simplest way is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the first 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 repayments while the property stays in the seller’s name.
You take over the first mortgage and create a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – 2 or 3 years. Rather than having the money sit in a bank they could be getting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term draws to a close you ought to be able to refinance the cost, or perhaps you could sell. Unless you struck an actual bad market the value of the home 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 lots of financial lenders that would like to make a deal. Financiers like property investing. The mortgage is mostly based on 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 do not care what sort of income you make. Conclude the deal with a 2nd mortgage done with the seller. In case you default they could eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can see the whole picture. It is good that seller and buyer can work hand in hand. If they can’t wait for a sale, you could still give them their asking price with a little overall flexibility on their part.