Let’s just say you ran across this deal and would like to wholesale it or flip it to a rehab investor. My guess is that you’re not a realtor. And, not only are you probably not a realtor, but you probably do not have access to the MLS. So, how do you accurately determine the […]…
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Are you thinking of investing in real estate? But you don’t have enough money to do this. In this article is a tip you are able to use as long as the property seller is willing to negotiate with you.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your very best guess is to locate a land that the owner has great desire for selling, whether because of moving, divorce, or frustration with the folks renting the property.
Actually, if you are currently renting and thinking of using this technique perhaps your landlord would be glad to assist you! There are several variations that can be used depending upon you and your vendor. Do they want the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The easiest method is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the first lender to presume the mortgage. If you can’t get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make repayments while the property stays in the seller’s name.
You take over the original 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 sit down in a bank they could be collecting 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 could sell. Unless you struck an actual bad market the value of the house should have risen by then.
A lot of mortgage lenders merely need to make a good investment. While your local bank may still shy away there are plenty of financial lenders that would like 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 know 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 second mortgage done with the seller. If you default they can still foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can see the whole picture. It is better that seller and buyer can work together. In the event they can’t wait for a sale, you may still give them their asking price with a little overall flexibility on their part.