New Orleans-area investors Braden Smith and Chris Leniek are not afraid of much of anything in their unique real estate market, so taking on a two-bedroom/one-bath home in need of a near-total remodel was pretty much par for the course. “We buy run-down properties, fix them up, then sell them,” Smith explained. “My business partner (Leniek) is a contractor, so we’ll do just about anything.”
Smith, owner of REvitalize Property Solutions, and Leniek, ow…
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Are you thinking of investing in real estate? But you don’t have enough cash to do this. Here is a tip you can use as long as the property seller is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your best gamble is to find a land that the owner has great interest in offering it, whether because of moving, divorce, or frustration with the folks renting the property.
Actually, if you maybe 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 – maybe facing foreclosure?
The simplest method 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 also 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 make a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – 2 or three years. Rather than having the money stay in a bank they can be collecting a high interest over 2 or 3 years with the remainder due in full at the end of the term.
When the term draws to a close you should be able to refinance the cost, or else you could sell. Unless you struck an actual bad market the value of the property should have risen in that time.
Most mortgage lenders merely want to make a good investment. While your local bank could still shy away there are a lot of financial lenders that would want to make a deal. Financiers like real estate. The mortgage is mostly based on 60-70% of the value of the property, so as long as they understand they get their money back in the value of the property if you default, they don’t care what kind of revenue you make. Complete the deal with a 2nd mortgage created with the seller. In case you default they can eventually foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can see the entire picture. It is good that seller and buyer can work hand in hand. If they can’t wait for a sale, you can still give them their initial price with a little versatility on their part.