Dallas, Texas – When Carrie Cook, president of Ignite Funding, thinks about the roughly $460 million her real estate investment company is managing right before she goes to sleep at… more
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Are you contemplating investing in property? However, you don’t have enough money to accomplish this. Here is a tip you can use as long as the property seller is willing to negotiate with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your best wager is to find a land that the owner has great desire for selling, whether because they are moving, divorce, or they are frustrated with the people renting the place.
Actually, if you are currently renting and thinking of using this strategy perhaps the owner would be glad to assist you! There are several variations that could be used depending on you and your owner. Do they need the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the first 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 payments while the property stays in the seller’s name.
You take over the first mortgage and make a 2nd 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. 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 should be able to refinance the cost, or you could sell. Unless you strike an actual bad market the value of the home should have risen by then.
Most mortgage lenders merely want to make a good investment. While your local bank may still shy away there are a lot of financial lenders that would like to make a deal. Financiers prefare property investing. The mortgage is usually around 60-70% of the value of the land, so as long as they know they get their money back in the value of the property if you default, they do not care what kind of money you make. Complete the deal with a second mortgage done with the seller. If you default they could still foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can observe the entire picture. It is better that seller and buyer may work together. If they can’t wait for a sale, you could still give them their initial price with a little overall flexibility on their part.