You know how I like to talk about marketing. One of the things you are going to learn today is a new marketing strategy called IP marketing. My guest today is McKinley Carbone. She is the marketing and sales coordinator for Open Letter Marketing, a direct mail marketing company specifically for real estate investors. It’s […]
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Are you contemplating investing in real estate? But you don’t have enough money to accomplish this. Right here is a tip you can use as long as the person selling the property is willing to negotiate with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your better guess is to find a property that the owner has great desire for selling, whether because of moving, divorce, or frustration with the folks renting the property.
Actually, if you are currently renting and thinking about using this approach perhaps the owner would be happy to help you out! There are several variations that could be used depending on you and your owner. Do they need the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The simplest way is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the first 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 payments while the property stays in the seller’s name.
You take over the original 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. Instead of having the money sit in a bank they can 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 ceases you should be able to refinance the cost, or you can sell. Unless you struck an actual bad market the value of the home 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 a lot 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 land if you default, they do not care what sort of revenue you make. Complete the deal with a 2nd mortgage created with the seller. If you default they could still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the entire 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.