Julie Ziglar Norman, a real estate agent with Dallas-based Prime Properties Realty and vice president of business development at Ziglar Inc., has seen a lot of things. The worst mistake… more
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Are you thinking of investing in property? However, you do not have enough cash to do so. Right here is a tip you are able to use as long as the property seller is willing to negotiate along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your best gamble is to locate a property that the owner has great interest in selling, whether because they are moving, divorce, or they are frustrated with tenants.
Actually, if you are currently renting and thinking about using this strategy perhaps the owner would be glad to assist you! There are some variations that can be used depending on you and your vendor. Do they want 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 payments – 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 could as well 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 create a second 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 stay in a bank they could be getting a high interest over 2 or 3 years with the remainder due in full at the end of the investment term.
When the term ends you need to be able to refinance the cost, or you could sell. Unless you struck a genuine bad market the value of the house should have risen in that time.
Most mortgage lenders merely need to make a great investment. While your local bank may still be scared there are lots of financial lenders that would wish 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 land if you default, they do not care what sort of income you make. Conclude the deal with a second mortgage done 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 that they can’t wait for a sale, you can still give them their initial price with a little versatility on their part.