4 Real Estate Lessons I Learned the Hard Way with Joseph Hogue – Podcast #134

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Show Notes – 4 Real Estate Lessons I Learned the Hard Way My guest today is Joseph Hogue from Peer Finance 101. Joseph helps people beat debt, make more money, and make their money work for them. In this show you will learn how Joseph got started in this business, and how he became a “money […]

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Are you contemplating investing in property? But you don’t have enough money to do this. 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 interested (or even understand) the concept outlined. Your better wager is to locate a property that the owner has great interest in offering it, whether because they are moving, divorce, or frustration with tenants.

Actually, if you maybe currently renting and thinking of using this approach perhaps your landlord would be glad to assist you! There are some variations that may be used depending on 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 payments – called ‘assuming’ the mortgage. You will need to be approved by the first lender to assume the mortgage. If you can’t get approved for an assumable mortgage you may as well 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 second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – 2 or three years. Rather than having the money stay in a bank they could be collecting a high interest over two or three years with the rest due in full at the end of the investment term.

When the term ends you should be able to refinance the cost, or else you can sell. Unless you hit a real bad market the value of the house should have risen in that time.

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 like to make a deal. Financiers like 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 land if you default, they do not care what kind of revenue you make. Complete the deal with a 2nd mortgage done with the seller. If you default they could still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.

Now you can observe the whole picture. It is good that seller and buyer may work together. If they can’t wait for a sale, you can still give them their asking price with a little overall flexibility on their part.

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