This is always one of the first questions I get when someone asks me about probate investing. “What are the first steps in the probate process after someone passes away”?. In video one of this 4 part series, the focus is on what happens when it’s time to open the probate? Probates have always […]
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Are you contemplating investing in real estate? But you don’t have enough money to do so. In this article is a tip you may use as long as the property seller is willing to negotiate along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your very best gamble is to find a land that the owner has great desire for selling, whether because they are moving, divorce, or they are frustrated with tenants.
Actually, if you are currently renting and thinking about using this technique perhaps your landlord would be glad to assist you! There are some variations that may be used depending on you and your seller. Do they want the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The easiest way is to consider taking over their mortgage repayments – 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 repayments 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 – two or 3 years. Rather than having the money sit down 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 you could sell. Unless you struck a genuine bad market the value of the house should have risen by then.
Most mortgage lenders merely need to make a good investment. While your local bank may still be scared there are lots of financial lenders that would like to make a deal. Financiers prefare property investing. The mortgage is usually 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 income you make. Complete the deal with a second mortgage created with the seller. In case you default they could eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the whole picture. It is good that seller and buyer can work together. In the event that they can’t wait for a sale, you can still give them their initial price with a little versatility on their part.