You remember about the property I have that the Tenant ran their car into the exterior wall of the house? I am still boiling about that incident and frankly just want to sell & off-load the four-plex to another Investor or Landlord. At this very moment – consider me a highly Motivated Seller! So in investigating […]…
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Are you thinking of investing in real estate? However you do not have enough money to do this. In this article is a tip you may 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 gamble is to locate a property that the owner has great interest in selling, whether because they are moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you maybe currently renting and thinking about using this technique perhaps the owner would be happy to assist you! There are several variations that could be used depending upon you and your vendor. Do they need the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The simplest way is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to assume 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 payments while the property remains in the seller’s name.
You take over the original mortgage and get a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – 2 or three years. Instead of having the money stay in a bank they could be collecting 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 should be able to refinance the cost, or else you can sell. Unless you strike an actual bad market the value of the property should have risen in that time.
A lot of mortgage lenders merely need to make a good investment. While your local bank could still be scared there are lots of financial lenders that would want to make a deal. Financiers prefare property investing. The mortgage is usually based on 60-70% of the value of the land, so as long as they understand they get their money back in the value of the estate if you default, they don’t care what sort of income you make. Conclude the deal with a 2nd mortgage created with the seller. If you default they can still foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can observe the whole picture. It is good that seller and buyer can work hand in hand. In the event that they can’t wait for a sale, you may still give them their asking price with a little versatility on their part.