At the beginning of the year I talked a lot about setting goals, and how that is the secret to your success. If you missed those posts, I will put the links below. Today I wanted to check in and see how you’re coming, and to tell you I have created something to help you […]
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Are you thinking of investing in property? However you do not have enough money to do this. In this article is a tip you may use as long as the person selling the property is willing to negotiate with you.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your better gamble is to locate a property that the owner has great desire for selling, whether because of 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 help you out! There are several variations that may 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 – perhaps facing foreclosure?
The simplest way is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the first lender to assume the mortgage. If you can’t 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 first mortgage and create a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – 2 or three years. Instead of having the money stay in a bank they could be getting a high interest over 2 or 3 years with the remainder due in full at the end of the term.
When the term ends you need to be able to refinance the cost, or else you could sell. Unless you struck a real 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 may still be scared there are lots of financial lenders that would wish to make a deal. Financiers prefare real estate. The mortgage is mostly around 60-70% of the value of the land, so as long as they understand they get their money back in the value of the land if you default, they do not care what kind of income you make. Conclude the deal with a 2nd mortgage done with the seller. In case you default they can still foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can see the complete picture. It is good that seller and buyer can work together. 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.