One of the premises is that you can get the property for less than fair market value (FMV), that’s where the seller motivation comes in.
Do sellers sell for less than FMV? Yup. I know two who did it recently, they each had a justification for it; I have already moved and needed the money to pay my other property and I wanted to move and needed the money. One went from $140K down to $115K and the other went from $360K to $320K and carried a 1st mortgage.
I am having trouble understanding why alot of these Strategies might help, I have been reading the books and Just dont GET IT. I learn better by example so if you could help me out I would appreciate it.
What is a note?
Its says in the course “You, the buyer, might give the seller a note for $10,000 secured by a mortgage on the real estate you are purchasing from him or her. The seller could then use the note at its face value to purchase another property.”
So when do you pay? Or is it saying for me (the buyer) not giving money down you (the seller) still own a portion of the house that you can collect on If I default on payments? And If so how do they collect?
thanks for the reply, Now I want to play the numbers game, Say i was buying the house at Fair Market Value, The house doesnt need repairs So I am intending on buying the property to Rent out, My question is this
The home was orignally bought for 90,000 at 7% for 20yrs making the monthly payments 697.00 a month
The home is now Listed for $100,000 and has an asumable loan of $80,000 meaning I make a second to the seller for $20k over a 5 year period at 9% making it attarctive to them. Making the second $415.00 a month
the first and second together make $1112.06 roughly a month yeah you put no money down but being able to find a renter to fill that and have a posotive cash flow would be impossible, I just dont ever see where this is a winning situation for an investor.
Note is a promise to pay based on the terms specified in the note (interest rate, frequency of payments, amount of payment, balloon if any) and secured by whatever is listed in this case the house. That’s just a piece of paper spelling out the terms.
You would then record the note at the county recorders. The order in which notes are recorded determines if it’s a 1st or 2nd mortgage.
If it was a 1st mortgage then if you default the seller can foreclose and if left unsatisfied take back the property. If it’s a 2nd mortgage they can still foreclose but the 1st mortgage, usually a bank, will get paid first from the foreclosure sale proceeds. If there’s anything left over what the bank was owed then it goes to the 2nd mortgage holder and on down the line.
So if the seller takes a 1st mortgage then they’re in a much better position than a 2nd which is typically used if the buyer cannot come up with the downpayment.
A seller would do this if they didn’t need all the cash, likes the idea of a monthly income secured by real estate, or wants to help you get into the property.
making a second to the seller for $10k over a 5 year period at higher%, so that the interest will add up to a $20,00.00 total is making it attractive to the seller,(Some sellers don’t care how they receive the money just as long as they get the total asking price.) and giving you the write off of the interest. This maybe the win/win situation you could be looking for?
Morgan,
the object in this example is to purchase the house, No Money Down, and a percentage UNDER FMV, so the Rent will pay P(principal) I(Interest) T(Taxes) I(Insurance)without costing YOU. Even if your Cash Flow is EVEN or Minor (25-50 a Month), you gain in Equity a year or two down the road when you Sell