I’d like to say that after the Affinity REI Club closed on its first investment property in February, we dove right into renovations while sporting plaid shirts, overhauls and big, cheesy grins, then promptly unveiled the gorgeous Tudor to sparkly-eyed buyers after 21 minutes of action and nine minutes of commercial breaks.
“Is that ours?” gushed Mrs. Buyer while she jumped up and down, hugging her husband. “Is that really ours?”
“It’s,” said Mr. Buyer, wiping a …
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Are you contemplating investing in property? However you don’t have enough cash to do so. In this article is a tip you can use as long as the person selling the property is willing to negotiate along.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your very best gamble is to find a land that the owner has great desire for offering it, whether because they are moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you are currently renting and considering using this strategy perhaps the owner would be happy to assist you! There are some variations that may be used depending upon you and your vendor. Do they desire the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The easiest way is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume 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 create a second 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. Rather than having the money sit in a bank they can be getting a high interest over 2 or 3 years with the rest due in full at the end of the term.
When the term ceases you need to be able to refinance the cost, or else you could sell. Unless you struck a real bad market the value of the house should have risen by then.
A lot of mortgage lenders merely want to make a great investment. While your local bank may still shy away there are a lot of financial lenders that would wish to make a deal. Financiers prefare real estate. The mortgage is usually around 60-70% of the value of the property, so as long as they know they get their money back in the value of the property if you default, they don’t care what sort of revenue you make. Complete the deal with a 2nd mortgage done with the seller. In case you default they can eventually foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can see the entire picture. It is good that seller and buyer may work hand in hand. In the event they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.