If you’re a landlord or you are thinking about being a landlord down the line, you’re going to want to pick up a copy of Mike Butler’s book “Landlording on Autopilot”. This book originally published in 2011, has been newly revised and updated. Landlording on Autopilot is the gold standard when it comes to […]
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Are you contemplating investing in property? However, you don’t have enough cash to do so. In this article is a tip you can use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your better wager is to locate a property that the owner has great desire for selling, whether because of moving, divorce, or frustration with tenants.
Actually, if you maybe currently renting and thinking of using this strategy 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 want the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to presume 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 first mortgage and create a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – two or three years. Rather than 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 need to be able to refinance the cost, or else you could sell. Unless you struck a genuine bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely need to make a great investment. While your local bank could still be scared there are lots of financial lenders that would want to make a deal. Financiers like property investing. 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 do not care what sort of money you make. Complete the deal with a 2nd mortgage created with the seller. In case you default they could still foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can observe the whole picture. It is better that seller and buyer can work hand in hand. In the event they can’t wait for a sale, you can still give them their asking price with a little versatility on their part.