We had a blast at our Dallas Conference & Expo with former University of Texas head football coach and our event kickoff speaker, Mack Brown. Watch along as Brown offers insights into how to be successful in life and in business—starting with practical tips you can implement today.
Thank you, Mack, for inspiring us and for helping us be better in business and in life!
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Are you contemplating investing in real estate? However, you do not have enough money to do this. Here is a tip you may use as long as the property seller is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your best guess is to find a land that the owner has great interest in offering it, whether because of moving, divorce, or frustration with the folks renting the property.
Actually, if you are currently renting and thinking about using this technique perhaps the owner would be happy to help you out! There are some variations that could be used depending upon you and your seller. Do they desire the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The easiest method is to consider taking 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 also try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the first mortgage and get a 2nd 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. Instead of having the money stay in a bank they can be collecting a high interest over two or three 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 could sell. Unless you hit a genuine bad market the value of the home should have risen by then.
Most mortgage lenders merely need to make a good investment. While your local bank could still be scared there are a lot of financial lenders that would want to make a deal. Financiers like property investing. The mortgage is usually 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 estate if you default, they do not care what kind of money you make. Conclude the deal with a second mortgage created with the seller. In case you default they can eventually foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see the complete picture. It is better that seller and buyer may work hand in hand. In the event that they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.