If you are a home flipper, you may be finding that your profits are shrinking. The latest Home Flipping Report from ATTOM Data Solutions shows a decrease in returns to… more
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Are you contemplating investing in property? However you do not have enough money to accomplish this. In this article is a tip you may use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your very best wager is to locate a property that the owner has great desire for selling, whether because they are moving, a divorce settlement, or they are frustrated with tenants.
Actually, if you are currently renting and thinking about using this strategy perhaps the owner would be happy to assist you! There are some variations that can be used depending upon you and your owner. Do they need the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The easiest way is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the original 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 original mortgage and get 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 three years. Rather than having the money sit in a bank they can be collecting a high interest over 2 or 3 years with the remainder due in full at the end of the investment term.
When the term ceases you should 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 in that time.
A lot of mortgage lenders merely want to make a great investment. While your local bank may still be lacking confidence there are plenty of financial lenders that would wish to make a deal. Financiers like real estate. The mortgage is mostly based on 60-70% of the value of the property, so as long as they know they get their money back in the value of the estate if you default, they don’t care what sort of money you make. Complete the deal with a second mortgage created with the seller. In case you default they can eventually foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can see the entire picture. It is better that seller and buyer may work together. If they can’t wait for a sale, you may still give them their asking price with a little versatility on their part.