There are many legitimate reasons to use a hard money lender. Compared to traditional lenders, hard money lenders can offer faster funding, flexible construction draws, no prepayment penalties, and a willingness to look beyond a specific borrower’s credit blemishes. This might beg the question, “When would a hard money lender turn down a deal?”
Daisy chain: In real estate, a deal that has been contracted to multiple parties before the end buyer.
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Are you thinking of investing in real estate? However you don’t have enough money to accomplish this. Right here is a tip you can 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 wager is to find a property that the owner has great interest in selling, whether because they are moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you are currently renting and thinking of using this strategy perhaps the owner would be glad to help you out! There are a few variations that may be used depending upon you and your owner. Do they desire the market price or are they just desperate 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 need to be approved by the original 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 obligations while the property remains in the seller’s name.
You take over the original mortgage and get a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – 2 or 3 years. Rather than having the money sit down in a bank they can be collecting a high interest over 2 or 3 years with the remainder due in full at the end of the investment term.
When the term draws to a close you ought to be able to refinance the cost, or you could sell. Unless you hit a real bad market the value of the property should have risen by then.
A lot of mortgage lenders merely need 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 prefare property investing. The mortgage is usually 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 property if you default, they do not care what kind of income you make. Complete the deal with a 2nd 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 good that seller and buyer can work hand in hand. In the event that they can’t wait for a sale, you can still give them their initial price with a little overall flexibility on their part.