Louisville investor Erik Hitzelberger is back again today for part two in this series on “Making smart investing decisions”. The topic of today’s show is why financial education is critical to building any successful business. It’s amazing how little financial education students are taught in our schools today. The last time Erik was a guest on […]
The post Why Financial Education is Critical to Building any Successful Business – with Erik Hitzelberger –…
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Are you thinking of investing in property? But you don’t have enough cash to do this. In this article is a tip you are able to use as long as the person selling the property is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your better gamble is to locate a land that the owner has great desire for offering it, whether because they are moving, divorce, or frustration with tenants.
Actually, if you maybe currently renting and thinking about using this technique perhaps the owner would be glad to help you out! There are some variations that could be used depending on you and your seller. Do they need the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The easiest method is to consider taking over their mortgage payments – 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 as well try a ‘subject to’ assumption where you merely make obligations while the property remains in the seller’s name.
You take over the first 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 3 years. Rather than having the money stay in a bank they can be getting a high interest over two or three years with the remainder due in full at the end of the investment term.
When the term ceases you should be able to refinance the cost, or else you can sell. Unless you hit a genuine bad market the value of the house should have risen by then.
Most mortgage lenders merely need to make a good investment. While your local bank could still be lacking confidence there are plenty of financial lenders that would want to make a deal. Financiers like real estate. The mortgage is mostly based on 60-70% of the value of the land, 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 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 good that seller and buyer can work together. If they can’t wait for a sale, you could still give them their initial price with a little versatility on their part.