Build Your Real Estate Business on a Firm Foundation


In the real estate business, you have to have a firm foundation – literally. If your property has a cracked foundation, you will likely take serious losses as you deal… more

The post Build Your Real Estate Business on a Firm Foundation appeared first on Think Realty | A Real Estate of Mind.

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Are you thinking of investing in property? However, you don’t have enough money to accomplish this. In this article 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 very best gamble is to find a property that the owner has great desire for selling, whether because of moving, a divorce settlement, or they are frustrated with tenants.

Actually, if you maybe currently renting and considering using this strategy perhaps your landlord would be glad to assist you! There are some variations that may be used depending upon you and your seller. Do they need the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?

The simplest way is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the initial 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 original mortgage and make a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – two or 3 years. Rather than 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 draws to a close you need to be able to refinance the cost, or perhaps you could sell. Unless you hit an actual bad market the value of the home should have risen in that time.

Most mortgage lenders merely need to make a good investment. While your local bank could still be lacking confidence there are plenty of financial lenders that would like to make a deal. Financiers prefare real estate. The mortgage is mostly around 60-70% of the value of the land, so as long as they understand they get their money back in the value of the estate if you default, they do not care what kind of revenue you make. Complete the deal with a 2nd mortgage created with the seller. If you default they can still foreclose on the property and sell it, settling the existing mortgage in the proceeds.

Now you can observe the whole picture. It is better that seller and buyer may work together. In the event 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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