We, as landlords, have certain expectations of the people who rent from us. These expectations include timely rent payments, prompt notifications of repair issues, and responsiveness to our attempts to… more
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Are you thinking of investing in property? But you don’t have enough money to do this. Here is a tip you may 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 best guess is to locate a land that the owner has great interest in offering it, whether because they are moving, a divorce settlement, or frustration with tenants.
Actually, if you maybe currently renting and thinking of using this technique perhaps the owner would be happy to assist you! There are several variations that may be used depending upon you and your owner. Do they desire the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The easiest method is to take 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 as well try a ‘subject to’ assumption where you merely make repayments while the property stays in the seller’s name.
You take over the first mortgage and create 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 stay in a bank they can be collecting a high interest over 2 or 3 years with the remainder due in full at the end of the term.
When the term draws to a close you should be able to refinance the cost, or you can sell. Unless you strike a real bad market the value of the house should have risen in that time.
Most mortgage lenders merely want to make a great investment. While your local bank may still be lacking confidence there are a lot of financial lenders that would want to make a deal. Financiers prefare real estate. The mortgage is usually based on 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 revenue you make. Complete the deal with a second mortgage created with the seller. If you default they could eventually foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can see the entire picture. It is good that seller and buyer can work hand in hand. If they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.