You’ve heard it said before that you “have to have money to make money”. And while this may be true, the caveat here is that it doesn’t have to be your money. That being said, with conventional financing being harder and harder to come by, finding other ways to finance your deals has become even […]…
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Are you thinking of investing in property? However, you do not have enough cash to accomplish this. Right here is a tip you may use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your best guess is to locate a land that the owner has great desire for offering it, whether because of moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you are currently renting and thinking of using this strategy perhaps your landlord would be glad to assist you! There are several variations that could be used depending upon you and your owner. Do they need the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The easiest method is to take over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the original lender to presume the mortgage. If you can’t get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make obligations while the property stays in the seller’s name.
You take over the first mortgage and create a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – two 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 ought to be able to refinance the cost, or perhaps you could sell. Unless you hit a genuine bad market the value of the property should have risen by then.
A lot of mortgage lenders merely need to make a good investment. While your local bank may still be lacking confidence there are lots of financial lenders that would like to make a deal. Financiers like real estate. The mortgage is usually based on 60-70% of the value of the land, so as long as they know they get their money back in the value of the land if you default, they don’t care what kind of money 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 off the existing mortgage with the proceeds.
Now you can see the complete picture. It is better that seller and buyer can work hand in hand. In the event they can’t wait for a sale, you could still give them their asking price with a little overall flexibility on their part.