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Are you contemplating investing in real estate? However, you do not have enough money to accomplish this. Here is a tip you can use as long as the person selling the property is willing to negotiate with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your better wager is to find a land that the owner has great interest in selling, whether because they are moving, divorce, or frustration with tenants.
Actually, if you maybe currently renting and thinking of using this technique perhaps your landlord would be glad to help you out! There are some variations that can be used depending upon you and your owner. Do they want the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The easiest way is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the first 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 stays in the seller’s name.
You take over the first mortgage and make a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – two or three years. Instead of having the money sit down in a bank they can be getting a high interest over 2 or 3 years with the rest due in full at the end of the investment term.
When the term ends you ought to be able to refinance the cost, or you could sell. Unless you strike an actual bad market the value of the house should have risen by then.
Most mortgage lenders merely need to make a good investment. While your local bank may still shy away there are lots of financial lenders that would wish to make a deal. Financiers like 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 land if you default, they do not care what sort of income you make. Complete the deal with a 2nd mortgage created with the seller. In case you default they could eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the complete 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 initial price with a little overall flexibility on their part.