Remembering Kent Davis of Equistream


Kent, a lifelong pastor and missionary, was also the owner of Equistream, a real estate investment firm that helped break down the barrier between investors at all levels of expertise… more

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Are you thinking of investing in real estate? But you do not have enough money to do so. Here is a tip you may 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 gamble is to locate a property that the owner has great interest in selling, whether because of moving, divorce, or they are frustrated with the people renting the place.

Actually, if you are currently renting and considering using this technique perhaps the owner would be happy to assist you! There are some variations that can be used depending upon you and your vendor. Do they need the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?

The easiest method is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the first lender to presume the mortgage. If you can’t get approved for an assumable mortgage you may 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 create a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – 2 or 3 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 draws to a close you ought to be able to refinance the cost, or perhaps you can sell. Unless you hit a genuine bad market the value of the home should have risen by then.

Most mortgage lenders merely need to make a good investment. While your local bank may still be lacking confidence there are a lot of financial lenders that would like to make a deal. Financiers like property investing. The mortgage is usually 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 kind of revenue you make. Conclude the deal with a second mortgage done with the seller. In case you default they can still foreclose on the property and sell it, paying down 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. In the event they can’t wait for a sale, you may still give them their initial price with a little versatility on their part.

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