To stay up to date with the latest in the real estate industry to may visit our property investing latest news. On the other hand in case you are starting real estate investing and would like to start profitable real estate investing today 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. In this article is a tip you can 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 guess is to locate a property that the owner has great interest in offering it, whether because of moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you are currently renting and considering using this technique perhaps the owner would be happy to assist you! There are several variations that could be used depending on you and your seller. Do they need the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The easiest way is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to assume the mortgage. If you can’t get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the first mortgage and create a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – two or three years. Rather than having the money stay in a bank they can be collecting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term ends you should be able to refinance the cost, or else you could sell. Unless you hit a real 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 may still shy away there are lots of financial lenders that would want to make a deal. Financiers like real estate. The mortgage is mostly 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 don’t care what sort of money you make. Conclude the deal with a 2nd mortgage done with the seller. If you default they can still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the entire picture. It is good that seller and buyer may work hand in hand. In the event they can’t wait for a sale, you can still give them their initial price with a little versatility on their part.