Dallas, Texas – “We are all in different phases of stuck, and we need a bridge to productivity.” Robert Nickell, founder of REIVA, summed up his personal experience in real… more
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Are you thinking of investing in property? But you do not have enough money to do this. In this article is a tip you can use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your best gamble is to find a land that the owner has great desire for offering it, whether because they are moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you are currently renting and thinking of using this approach perhaps your landlord would be glad to help you out! 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 of the monthly payments – maybe facing foreclosure?
The simplest way is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the first lender to presume the mortgage. If you can’t get approved for an assumable mortgage you may also 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 get a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – 2 or three years. Rather than having the money sit in a bank they could be collecting 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 should be able to refinance the cost, or perhaps you can sell. Unless you struck a real bad market the value of the home should have risen in that time.
Most mortgage lenders merely need to make a good investment. While your local bank may still shy away 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 understand they get their money back in the value of the land if you default, they do not care what sort of revenue 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, settling the existing mortgage in the proceeds.
Now you can observe the complete picture. It is good that seller and buyer may work together. If they can’t wait for a sale, you can still give them their initial price with a little versatility on their part.