There are many part-time real estate investors who ask this one specific question, “Am I ready to transition from part-time real estate investing to full-time?” I know from my own… more
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Are you thinking of investing in property? But you don’t have enough cash to do this. In this article is a tip you are able to 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 best wager is to find a property that the owner has great interest in selling, whether because of moving, divorce, or frustration with the people renting the place.
Actually, if you are currently renting and thinking about using this approach perhaps your landlord would be happy to assist you! There are a few variations that may be used depending upon you and your seller. Do they want the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The simplest method is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the original 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 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 three years. Instead of having the money sit in a bank they could be collecting a high interest over two or three 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 perhaps you can sell. Unless you hit a genuine bad market the value of the home should have risen by then.
A lot of mortgage lenders merely want to make a good investment. While your local bank may still be scared there are lots of financial lenders that would want to make a deal. Financiers prefare property investing. The mortgage is mostly based on 60-70% of the value of the property, so as long as they understand they get their money back in the value of the land if you default, they don’t care what kind of income you make. Conclude the deal with a 2nd mortgage created with the seller. If you default they can eventually foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can observe the whole picture. It is better that seller and buyer may work hand in hand. If they can’t wait for a sale, you may still give them their initial price with a little versatility on their part.