“When you’re buying investment property, especially property you want to fix and flip or fix up and rent out, you want to be sure that you’re getting the best deal possible. As you sit down to negotiate before writing up that important contract, there are several points to consider–and it’s not just about the final price […]…
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Are you thinking of investing in property? However you don’t have enough cash to do so. Here is a tip you may use as long as the property seller is willing to negotiate with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your very best guess is to find a land that the owner has great interest in selling, whether because of moving, divorce, or they are frustrated with the folks renting the property.
Actually, if you are currently renting and thinking about using this strategy perhaps the owner would be happy to help you out! There are some variations that may be used depending upon you and your vendor. Do they desire the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage obligations – 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 could 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 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 3 years. Rather than having the money stay in a bank they can be getting a high interest over 2 or 3 years with the rest due in full at the end of the investment term.
When the term draws to a close you ought to be able to refinance the cost, or you can sell. Unless you strike an actual bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely want to make a great investment. While your local bank could still shy away there are a lot of financial lenders that would want to make a deal. Financiers like real estate. The mortgage is usually around 60-70% of the value of the land, 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 2nd mortgage created with the seller. In case you default they can 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 better that seller and buyer can work together. In the event that they can’t wait for a sale, you may still give them their asking price with a little overall flexibility on their part.