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Are you contemplating investing in real estate? But you do not have enough cash to do this. Right 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 all sellers will be willing (or even understand) the concept outlined. Your very best guess is to locate a property that the owner has great desire for selling, whether because of moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you maybe currently renting and considering using this technique perhaps the owner would be glad to assist you! There are several variations that can be used depending upon you and your seller. Do they want the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The simplest method is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the first lender to assume 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 payments while the property remains in the seller’s name.
You take over the original 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 – 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 you could sell. Unless you strike a genuine bad market the value of the property should have risen by then.
Most mortgage lenders merely want to make a great investment. While your local bank may still shy away 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 property, 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 sort of revenue you make. Conclude the deal with a second mortgage created with the seller. In case you default they could still foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can see the entire picture. It is better that seller and buyer can work hand in hand. In the event they can’t wait for a sale, you could still give them their asking price with a little overall flexibility on their part.