I was looking up ugly, abandoned homes in the Southwest region and ran across this gem. Leif Swanson, spotted this deal a few years ago. Located in West Phoenix – this investment property has 3 bedrooms, 2 bathrooms, 1656 square feet of living space and a one car garage. Built in 1959 – it sold for $213,00 in […]…
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Are you thinking of investing in property? However you don’t have enough cash to do this. In this article is a tip you can use as long as the person selling the property is willing to negotiate along.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your best gamble is to locate a land that the owner has great desire for selling, whether because of moving, a divorce settlement, or frustration with tenants.
Actually, if you maybe currently renting and considering using this strategy perhaps the owner would be glad to assist you! There are some variations that can be used depending on you and your seller. Do they need the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The easiest way is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the first lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make payments while the property stays in the seller’s name.
You take over the first mortgage and create a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – 2 or 3 years. Instead of having the money sit in a bank they could be getting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term ceases you should be able to refinance the cost, or else you could sell. Unless you struck a genuine bad market the value of the house should have risen by then.
A lot of mortgage lenders merely need to make a great investment. While your local bank may still shy away 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 understand they get their money back in the value of the estate if you default, they do not care what kind of money you make. Conclude the deal with a 2nd mortgage done with the seller. If you default they can eventually foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see the complete picture. It is good that seller and buyer may work hand in hand. If they can’t wait for a sale, you may still give them their initial price with a little versatility on their part.