You know those things that everyone tells you not to do, but you think, “It won’t be like that for me!” and you do it anyway. Like, when your parents… more
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Are you thinking of investing in real estate? But you don’t have enough money to do so. In this article is a tip you may use as long as the person selling the property is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your very best guess is to locate a land that the owner has great interest in selling, whether because of moving, divorce, or they are frustrated with tenants.
Actually, if you maybe currently renting and considering using this strategy perhaps the owner would be glad to assist you! There are a few variations that can be used depending upon you and your owner. Do they need the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The simplest method is to take 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 could as well try a ‘subject to’ assumption where you merely make obligations while the property stays in the seller’s name.
You take over the original mortgage and make a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – 2 or three years. Rather than 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 ceases you need to be able to refinance the cost, or perhaps you could sell. Unless you hit an actual bad market the value of the house should have risen by then.
Most mortgage lenders merely want to make a great investment. While your local bank may still shy away there are lots of financial lenders that would like to make a deal. Financiers prefare real estate. The mortgage is mostly around 60-70% of the value of the property, so as long as they understand they get their money back in the value of the property if you default, they do not care what kind of money you make. Complete the deal with a second mortgage done with the seller. In case you default they could still foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the complete picture. It is good that seller and buyer can work together. If they can’t wait for a sale, you may still give them their asking price with a little overall flexibility on their part.