Until the recent development of online real estate financing marketplaces, it was difficult for smaller investors to participate in direct investments in commercial real estate projects. The development of these… more
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Are you contemplating investing in property? However you do not have enough cash to accomplish this. In this article is a tip you can use as long as the property seller is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your very best guess is to locate a property that the owner has great desire for selling, whether because of moving, divorce, or frustration with the people renting the place.
Actually, if you are currently renting and considering using this approach perhaps your landlord would be happy to assist you! There are several variations that may be used depending on you and your seller. Do they desire the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The easiest method is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to presume 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 get a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – 2 or 3 years. Rather than having the money stay in a bank they could be getting a high interest over 2 or 3 years with the rest due in full at the end of the term.
When the term ends you should be able to refinance the cost, or you could sell. Unless you struck a genuine bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely want to make a great investment. While your local bank could still be scared there are a lot of financial lenders that would wish to make a deal. Financiers prefare real estate. The mortgage is mostly around 60-70% of the value of the land, so as long as they understand they get their money back in the value of the land if you default, they do not care what kind of income you make. Complete the deal with a 2nd mortgage created with the seller. If you default they can eventually foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can observe the whole picture. It is better that seller and buyer may work together. In the event they can’t wait for a sale, you may still give them their asking price with a little versatility on their part.