If I could pick one thing that you could do today that would make an enormous change in your business over the next 12 months it would be to get an accountability partner. I have had one for over more than 5 years now, and it was hands down one of the best things I have […]
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Are you thinking of investing in property? However you don’t have enough cash to do so. Right here is a tip you can 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 very best guess is to find a property that the owner has great desire for offering it, whether because they are moving, a divorce settlement, or frustration with tenants.
Actually, if you maybe currently renting and thinking of using this strategy perhaps the owner would be glad to help you out! There are a few variations that could be used depending on you and your owner. Do they need the market price or are they just eager 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 have to be approved by the first lender to assume the mortgage. If you cannot 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 first mortgage and create a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – two or 3 years. Rather than having the money sit 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 ceases you should be able to refinance the cost, or perhaps you could sell. Unless you struck an actual bad market the value of the house should have risen by then.
Most mortgage lenders merely want to make a good investment. While your local bank could still shy away there are lots of financial lenders that would want to make a deal. Financiers like real estate. The mortgage is mostly 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 do not care what sort of money you make. Complete the deal with a second 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 whole picture. It is good that seller and buyer may work together. If they can’t wait for a sale, you could still give them their asking price with a little versatility on their part.