I have a great show today on how one real estate pro went from selling dump trucks to becoming a successful real estate investor. My guest is Whitney Nicely from Knoxville, TN. Whitney has purchased dozens of properties in less than 3 years. Like me, she is also passionate about seeing more women become a […]
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Are you contemplating investing in property? But you don’t have enough cash to do so. Right here is a tip you may use as long as the property seller is willing to negotiate with you.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your best gamble is to locate a land that the owner has great interest in selling, whether because of moving, divorce, or they are frustrated with tenants.
Actually, if you are currently renting and thinking of using this technique perhaps the owner would be happy to help you out! There are several variations that may be used depending upon you and your vendor. Do they desire the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The simplest method is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to presume the mortgage. If you can’t get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make obligations while the property stays in the seller’s name.
You take over the first mortgage and make 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 three years. Instead of having the money sit down in a bank they could be getting a high interest over two or three years with the remainder due in full at the end of the term.
When the term ceases you need to be able to refinance the cost, or perhaps you could sell. Unless you strike a real bad market the value of the home should have risen by then.
A lot of mortgage lenders merely need to make a good investment. While your local bank could still be scared there are plenty of financial lenders that would like to make a deal. Financiers prefare 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 income you make. Conclude the deal with a 2nd mortgage created with the seller. If you default they could eventually foreclose on the property and sell it, settling the existing mortgage with 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.