In today’s show we are going to talk about strategies for getting more offers accepted in your real estate investing business. My guest today is Boston investor, Tom Caferella. Tom started out like so many of us by doing something different. He was a CPA in his former life. Tom’s company, Ocean City Development is […]
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Are you contemplating investing in property? However, you do not have enough money to do so. Here is a tip you may use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your very best guess is to find a property that the owner has great desire for selling, whether because of moving, divorce, or they are frustrated with the people renting the place.
Actually, if you maybe currently renting and thinking about using this strategy perhaps your landlord would be happy to assist you! There are some variations that can be used depending upon you and your seller. Do they desire the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The simplest method is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume the mortgage. If you cannot get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make obligations while the property stays in the seller’s name.
You take over the first mortgage and make a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – 2 or three years. Instead of having the money stay in a bank they could be getting a high interest over two or three years with the remainder due in full at the end of the term.
When the term ends you should be able to refinance the cost, or else you can sell. Unless you struck an actual bad market the value of the home should have risen by then.
A lot of mortgage lenders merely need to make a great investment. While your local bank may still be lacking confidence there are a lot of financial lenders that would wish to make a deal. Financiers like property investing. The mortgage is mostly around 60-70% of the value of the property, 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. Complete the deal with a 2nd mortgage done 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 complete picture. It is good that seller and buyer may work together. In the event that they can’t wait for a sale, you could still give them their asking price with a little versatility on their part.