You’ve heard it said before that you “have to have money to make money”. And while this may be true, the caveat here is that it doesn’t have to be your money. That being said, with conventional financing being harder and harder to come by, finding other ways to finance your deals has become even […]…
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Are you contemplating investing in real estate? However, you do not have enough cash to do so. Right here is a tip you may 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 better guess is to locate a land that the owner has great interest in selling, whether because of moving, divorce, or frustration with tenants.
Actually, if you maybe currently renting and thinking of using this technique perhaps your landlord would be glad to help you out! There are several variations that could be used depending upon you and your owner. Do they want the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The simplest way is to consider taking over their mortgage obligations – 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 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 – 2 or three years. Instead of having the money stay in a bank they can be collecting a high interest over 2 or 3 years with the rest due in full at the end of the term.
When the term ends you should be able to refinance the cost, or perhaps you can sell. Unless you hit a real bad market the value of the home should have risen by then.
A lot of mortgage lenders merely want to make a good investment. While your local bank may still be lacking confidence there are a lot 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 property, so as long as they know they get their money back in the value of the land if you default, they do not care what sort of income you make. Conclude the deal with a 2nd mortgage created with the seller. In case you default they can eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can see the entire picture. It is good that seller and buyer can work together. In the event they can’t wait for a sale, you may still give them their initial price with a little versatility on their part.