Randy, Bob, Doug, Kim & Geri – they ALL DID IT! You betcha – they all closed real estate investing deals and took the time to tell us about their deal and investing strategies used. With profits from $5k – $50K – because of their AWESOMENESS – they all received some REIClub Swag for sharing their investment […]…
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Are you thinking of investing in real estate? However you don’t have enough cash to do so. In this article is a tip you are able to use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your very best wager is to find a property that the owner has great desire for selling, whether because they are moving, divorce, or they are frustrated with tenants.
Actually, if you are currently renting and considering using this strategy perhaps the owner would be glad to assist you! There are several variations that could be used depending upon you and your seller. Do they want the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to assume the mortgage. If you cannot get approved for an assumable mortgage you could 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 original mortgage and create 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 can be getting a high interest over 2 or 3 years with the rest due in full at the end of the term.
When the term ends you need to be able to refinance the cost, or perhaps you can sell. Unless you strike a real bad market the value of the home should have risen in that time.
Most mortgage lenders merely want to make a good investment. While your local bank could still be scared there are plenty 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 land, so as long as they understand they get their money back in the value of the property if you default, they do not care what sort of income you make. Complete the deal with a 2nd mortgage created with the seller. If you default they can eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the whole picture. It is good that seller and buyer can work hand in hand. In the event that they can’t wait for a sale, you may still give them their asking price with a little overall flexibility on their part.