Jeff Cowin moved into Detroit’s Virginia Park historic district in 2010 when the area was still full of abandoned homes, blighted buildings, squatters, and crime. At the time, neither Cowin nor the neighborhood had any idea just how positive the new homeowner would be for the area. Today, Cowin’s street is fully renovated thanks, in large part, to his efforts. In addition, he owns a thriving rental portfolio within walking distance of his home.
“I’ve personally managed renovati…
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Are you thinking of investing in real estate? But you do not have enough cash to do so. In this article is a tip you may use as long as the person selling the property is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your best wager is to locate a property that the owner has great interest in selling, whether because of moving, a divorce settlement, or frustration with the people renting the place.
Actually, if you maybe currently renting and considering using this technique perhaps the owner would be happy to assist you! There are some variations that can be used depending on you and your owner. Do they desire the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The easiest method 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 can’t get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make repayments while the property stays in the seller’s name.
You take over the first mortgage and get a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – two or three years. Rather than having the money sit down in a bank they could be getting a high interest over two or three years with the rest due in full at the end of the term.
When the term ceases you need to be able to refinance the cost, or perhaps you could sell. Unless you strike a genuine bad market the value of the house should have risen in that time.
Most mortgage lenders merely need to make a great investment. While your local bank may still be lacking confidence there are plenty of financial lenders that would like to make a deal. Financiers like real estate. The mortgage is usually 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 revenue you make. Complete the deal with a second mortgage created with the seller. In case you default they can still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the whole picture. It is good that seller and buyer can work hand in hand. In the event they can’t wait for a sale, you may still give them their asking price with a little overall flexibility on their part.