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 don’t have enough money 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 every seller will be willing (or even understand) the concept outlined. Your best gamble is to locate a land that the owner has great desire for offering it, whether because they are moving, divorce, or frustration with tenants.
Actually, if you maybe currently renting and thinking about using this technique perhaps the owner would be happy to help you out! There are a few variations that could be used depending upon you and your vendor. Do they need the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The simplest way is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the initial 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 obligations while the property remains in the seller’s name.
You take over the first mortgage and get a 2nd 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. Rather than having the money sit down 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 ends you need to be able to refinance the cost, or perhaps you can sell. Unless you strike a real bad market the value of the property should have risen in that time.
A lot of mortgage lenders merely want to make a great investment. While your local bank may still be scared there are a lot of financial lenders that would want to make a deal. Financiers prefare property investing. The mortgage is usually around 60-70% of the value of the land, so as long as they understand they get their money back in the value of the land if you default, they do not care what sort of income 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 see the entire picture. It is better that seller and buyer may work together. In the event they can’t wait for a sale, you may still give them their initial price with a little versatility on their part.