In real estate acquisitions, you seek the coveted off-market deals. These deals are more likely to be mis-priced, creating an attractive risk-return structure for operators with a track record for executing a specific investment strategy. However, fully-marketed deals can …
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Are you thinking of investing in property? However, you do not have enough money to do so. In this article is a tip you may use as long as the property seller is willing to negotiate with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your best gamble is to find a property that the owner has great desire for offering it, whether because they are moving, divorce, or they are frustrated with the folks renting the property.
Actually, if you maybe currently renting and thinking of using this technique perhaps the owner would be glad to assist you! There are some variations that can be used depending on you and your vendor. Do they need the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The simplest method is to take over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to assume the mortgage. If you cannot get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the first mortgage and create a second 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. Instead of having the money stay in a bank they can be getting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term ceases you should be able to refinance the cost, or you could sell. Unless you struck a genuine bad market the value of the property should have risen in that time.
Most mortgage lenders merely need to make a great investment. While your local bank could still shy away there are lots of financial lenders that would wish to make a deal. Financiers like property investing. The mortgage is usually around 60-70% of the value of the land, so as long as they understand they get their money back in the value of the property if you default, they do not care what kind of revenue you make. Conclude the deal with a second mortgage done 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 entire picture. It is better that seller and buyer can work together. If they can’t wait for a sale, you could still give them their initial price with a little overall flexibility on their part.