So, you’ve found a great real estate deal and a motivated seller ready to hand you the keys at closing. At this point, you may debate whether to wholesale the deal to another investor buyer for quick cash or to rehab the property yourself, which will obviously take longer but should yield a larger profit. To help you make up your mind, I’ll help to point out the key differences between the two and the pros and cons of each decision.
Let’s get started!
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Are you thinking of investing in real estate? But you do not have enough money to accomplish this. Here is a tip you can 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 they are frustrated with the people renting the place.
Actually, if you are currently renting and considering using this technique perhaps your landlord would be glad to assist you! There are several variations that can be used depending on you and your seller. Do they desire the market price or are they just eager to get out from 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 original 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 payments while the property remains in the seller’s name.
You take over the original mortgage and make a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – 2 or three years. Instead of having the money sit down in a bank they could 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 ends you should be able to refinance the cost, or perhaps you can sell. Unless you struck a genuine bad market the value of the house should have risen by then.
Most mortgage lenders merely want to make a good investment. While your local bank may still be lacking confidence 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 know they get their money back in the value of the estate if you default, they don’t care what sort of revenue you make. Conclude the deal with a 2nd mortgage done with the seller. If you default they could eventually foreclose on the property and sell it, paying down 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. If they can’t wait for a sale, you can still give them their asking price with a little overall flexibility on their part.