I fully admit that when I first started in this business, I had no clue how I was going to pay for my properties. I didn’t have much money, and truth be told, I thought I’d have to actually BUY properties to get my piece of the real estate investment pie. Man was I wrong. […]…
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Are you contemplating investing in property? However, you do not have enough cash to do this. Right here is a tip you may use as long as the property seller is willing to negotiate along.
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 selling, whether because they are moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you maybe currently renting and considering using this approach perhaps the owner would be glad to assist you! There are a few variations that could be used depending on you and your vendor. Do they need the market price or are they just eager 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 initial 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 remains in the seller’s name.
You take over the first mortgage and get a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – 2 or three years. Instead of having the money sit 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 term.
When the term ends you should be able to refinance the cost, or else you can sell. Unless you struck an actual bad market the value of the home should have risen in that time.
Most mortgage lenders merely want to make a good investment. While your local bank could still shy away there are lots of financial lenders that would want to make a deal. Financiers prefare real estate. The mortgage is mostly around 60-70% of the value of the land, so as long as they know they get their money back in the value of the property if you default, they do not care what sort of income 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 with the proceeds.
Now you can see the entire picture. It is better that seller and buyer may work hand in hand. In the event that they can’t wait for a sale, you can still give them their initial price with a little overall flexibility on their part.