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Are you contemplating investing in real estate? But you do not have enough cash to accomplish this. Here is a tip you may use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your best gamble is to find a land that the owner has great interest in offering it, whether because they are moving, a divorce settlement, 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 several variations that can 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 take over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the original lender to presume the mortgage. If you can’t 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 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 three years. Rather than having the money sit 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 term.
When the term ceases you need to be able to refinance the cost, or perhaps you can sell. Unless you strike an actual bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely need to make a great investment. While your local bank may still be lacking confidence there are plenty of financial lenders that would wish to make a deal. Financiers like real estate. The mortgage is usually 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 don’t care what kind of money you make. Complete the deal with a 2nd mortgage created with the seller. If you default they can still foreclose on the property and sell it, paying off the existing mortgage with 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 can still give them their initial price with a little overall flexibility on their part.