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Would you like to learn how to not only scale a portfolio but learn how to do it with seller financing? Maximize your cash and make it go much further.
In this video you will learn the following…
• How to use Seller Financing to purchase Investment Property
• Property Management tips
• Learn to scale your portfolio
Basic Types of Seller Financing
1. Contract for Deed (Land Contract)
This is an agreement where the buyer makes payments to the seller over a period of time. Usually there is a down payment, monthly payments, and a balloon payment. The monthly payments are usually amortized over 30 years. The balloon payment is typically 3, 5, or 7 years out. This is when the remaining balance of the loan to the seller is due. However, this all comes down to what is negotiated between the buyer and the seller. You might be able to get a lower down payment, or lower interest rate and you might not need a credit check to purchase.
2. Subject To
With a Subject to, the buyer takes over making the seller’s current mortgage payments. The loan remains in the seller’s name, but the title transfers to the buyer. A lot of times the buyer has to pay the sellers late payments and fees to get the mortgage caught up. This can be a big relief for the sellers that are in foreclosure.
Also a good strategy that works well for investors/buyers who understand creative financing.
The structure of the deal matters. It could have a lower interest rate, and lower monthly payments. Also it may come with little to nothing down and no credit risk. These type of deals take professional help – highly experienced Realtors, title companies and legal advice.
3. Rent to Own (Lease Option)
The owner leases the property to the buyer and the buyer has an option to purchase the property for a set time. There is usually a down payment or lease option fee that is paid upfront. The monthly rent might be a little higher than market rent. This is because a portion of the rent, that is above market, goes towards the purchase price.
The buyer could sublease the property or do a rent-to-own to another party. Making money from a higher down payment, higher monthly rent, and a larger purchase price.
4. Assumable Mortgage
The buyer assumes the current loan on the house from the mortgage company. The buyer will need to qualify for the loan like any other loan. The mortgage company will then transfer the loan into the buyer’s name. All FHA and VA loans are assumable, but you can usually only have one FHA or VA loan at a time. For the FHA, you must owner occupy for 1 year and for VA you must be a Vet and owner occupy.
However, you must be prudent with your use of leverage. Leverage can be a disadvantage to you if used incorrectly. Buying overpriced and non-cash flowing properties with leverage could lead to financial ruin. This happened to a lot of overleveraged investors in the last Recession. That is why we stress the importance of the property cash flowing from the beginning.
Don’t forget, I lead the Encore Investment Team of Realtors. We will guide you along the path of successful investing. See below to book a strategy session.
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