One of the most successful marketing strategies for real estate investors over time has been direct mail marketing. Despite the fact that it is so commonly used in most markets, to this day direct mail marketing still produces consistent deals that are generally more profitable than those found on the MLS, or even those found […]…
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Are you contemplating investing in property? However, you do not have enough cash to do so. In this article is a tip you can use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your best gamble is to find a property that the owner has great desire for offering it, whether because of moving, a divorce settlement, or they are frustrated with tenants.
Actually, if you maybe currently renting and thinking of using this technique perhaps your landlord would be happy to assist you! There are a few variations that may be used depending on you and your seller. Do they want the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The simplest method is to take 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 payments while the property remains in the seller’s name.
You take over the first mortgage and make a second mortgage on the remaining cost of the property 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 could be getting a high interest over two or three years with the rest due in full at the end of the term.
When the term ceases you should be able to refinance the cost, or you can sell. Unless you struck a real bad market the value of the property should have risen in that time.
Most mortgage lenders merely want to make a great investment. While your local bank could still be scared there are plenty of financial lenders that would wish to make a deal. Financiers prefare property investing. 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 estate if you default, they don’t care what sort of revenue you make. Conclude the deal with a second mortgage created with the seller. In case you default they can still foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can observe the complete picture. It is good that seller and buyer may work together. In the event that they can’t wait for a sale, you can still give them their asking price with a little overall flexibility on their part.