To stay updated with the latest in the real estate industry to may visit our real estate latest news. On the other hand if you’re starting real estate investing and would like to start profitable property investing now get a copy of our profitable real estate investing ebook.
Are you contemplating investing in property? However you don’t have enough cash to do so. Here is a tip you may 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 very best gamble is to locate a property that the owner has great desire for selling, whether because they are moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you maybe currently renting and thinking of using this approach perhaps your landlord would be happy to assist you! There are some variations that may be used depending upon you and your seller. Do they need the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The simplest method is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to assume the mortgage. If you cannot get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make obligations while the property remains in the seller’s name.
You take over the original mortgage and make a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – 2 or 3 years. Instead of having the money sit in a bank they can be collecting a high interest over 2 or 3 years with the rest due in full at the end of the investment term.
When the term draws to a close you need to be able to refinance the cost, or perhaps you can 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 a lot of financial lenders that would want to make a deal. Financiers prefare property investing. The mortgage is usually based on 60-70% of the value of the property, so as long as they know they get their money back in the value of the property if you default, they don’t care what sort of money you make. Complete the deal with a second mortgage created with the seller. If you default they could still foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can see the complete picture. It is better that seller and buyer can work hand in hand. In the event that they can’t wait for a sale, you could still give them their initial price with a little versatility on their part.