We are well aware that the first wholesale discount property or real estate deal is frequently the hardest one to discover for the new real estate investor. Finding potential properties, getting them under contract and flipped to another investor or end-buyer can be both easy and laborious for some investors. We have put together this list of the best […]…
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Are you thinking of investing in property? However you do not have enough money to accomplish this. In this article is a tip you can 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 better guess is to locate a property that the owner has great interest in offering it, whether because they are moving, a divorce settlement, or they are frustrated with tenants.
Actually, if you maybe currently renting and thinking about using this strategy perhaps your landlord would be happy to assist you! There are several 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 of the monthly payments – maybe facing foreclosure?
The simplest method is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the original 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 obligations 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 house with the seller. Offer a high, interest-only payment for a short time frame – 2 or 3 years. Rather than having the money stay in a bank they can be getting a high interest over 2 or 3 years with the remainder due in full at the end of the term.
When the term ceases you need to be able to refinance the cost, or else you could sell. Unless you hit an actual bad market the value of the property should have risen by then.
A lot of mortgage lenders merely need to make a good investment. While your local bank could still shy away there are plenty of financial lenders that would wish to make a deal. Financiers like property investing. The mortgage is mostly around 60-70% of the value of the property, 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 money you make. Complete the deal with a second mortgage created with the seller. In case you default they could eventually foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can observe the entire picture. It is good that seller and buyer may 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.