Many investors miss the obvious financing for their real estate deals that is available to them while they negotiate with the homeowner. In fact, I can often get 90% or more of the purchase price financed based on calendario economico without ever taking another step.

Investors have the mistaken notion that all motivated sellers are financially challenged and will receive no equity from the sale of their house. While I agree that the percentage of potential sellers who have enough equity in their homes to sell at a discount price and still receive any substantial cash is relatively low, the act is you’ll come across them regularly. In these instances, your first thought should be seller financing. In other words will the seller accept a small portion of their proceeds now, and the balance a year or two from now.

The way I start this conversation is to ask what they plan to do with the money from the sale of their house. Most will recite a list of several items they want to buy or pay off, but have no clue what they’ll do with the balance except to put it in the bank. That’s when I pounce on the opportunity.

My script goes something like this…”I’m sure that you want to get as much as you can for your house right? If I could pay you more for your house and give you the $xx dollars you need at closing to handle the bills you have, would you be willing to allow me to pay the rest of the money I would owe you 1 year from closing?”

That almost always gets a positive response. Now notice, I said I’d pay more, but since we have not yet discussed a price, it’s more than what? In other words, this will not cost you anything, and you’ll have some financing already built in. In case you have troubles with your finances, we recommend to see the this new blog articles, https://business-insolvency-company.co.uk/near-me/norfolk/.

The other financing that is available at the negotiations is the existing loan on the property. In other words: purchasing the property “subject to” the existing mortgage. Title (ownership) to the property transfers to you, but the loan remains in the original borrower’s name. By purchasing the property subject to the existing mortgage you take over the existing financing without having to obtain a new loan.

Another advantage is that the loan will never show up on your credit report. That doesn’t mean you don’t have to make on-time monthly payments. It simply means that the loan will not affect your loan to income ratios. You must still make timely payments, and the lender still has a mortgage on the property to secure their interests.

Now let’s put these techniques to work. Suppose that the seller owes about the same as what you can afford to pay for the property. The first thought should be to take over the existing loan – which means you’ll have almost 100% financing on the property right from the start. If the seller has significant equity, think about offering the idea of seller financing for their equity. Even if you have to offer 6-8% interest – isn’t it worth it to have the loan already in place?

Finally, if the Seller has a loan and significant equity, simply combine the two strategies taking over the existing loan and pitching seller financing for the balance. Using any and all of these techniques you’ll be able to take title to properties with a very small down payment.

Tomorrow we’ll discuss how to take care of the small down payment along with all of the other costs associated with the purchase and rehab of a property. Be sure to look at for Part 3 in the series.

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