Dallas, Texas – When Brad Sumrok, founder and CEO of Apartment Investor Mastery, first started investing in apartment buildings, he wasn’t in it for the love of real estate. He was in it for what real estate could do for him.
“I like investing in apartments, but you didn’t hear me say I love it,” the seasoned multifamily investor stated boldly at the annual Think Realty National Conference & Expo in Dallas, Texas, on February 24, 2018. “All I wanted to do at the time wa…
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Are you contemplating investing in property? But you do not have enough money to do so. Here is a tip you are able to 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 best guess is to locate a property that the owner has great interest in offering it, whether because of moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you maybe currently renting and thinking of using this approach perhaps your landlord would be happy to help you out! There are some variations that can be used depending upon you and your vendor. 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 need to be approved by the original lender to assume the mortgage. If you can’t get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the original mortgage and make 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 down in a bank they could be collecting a high interest over 2 or 3 years with the rest due in full at the end of the term.
When the term draws to a close you should be able to refinance the cost, or perhaps you could sell. Unless you strike a real bad market the value of the property should have risen by then.
A lot of mortgage lenders merely need to make a great investment. While your local bank may still be scared there are a lot of financial lenders that would wish to make a deal. Financiers like real estate. The mortgage is mostly 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 don’t care what kind of revenue you make. Complete the deal with a second mortgage created 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 observe the complete picture. It is good that seller and buyer may work together. In the event they can’t wait for a sale, you can still give them their initial price with a little versatility on their part.