The Federal Reserve followed through on its latest promise to raise interest rates. Fed Chief Janet Yellen announced a quarter point hike in the federal funds rate Wednesday March 15,… more
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Are you contemplating investing in real estate? But you do not have enough money to accomplish this. In this article is a tip you can use as long as the person selling the property is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your very best guess is to find a land that the owner has great desire for 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 thinking of using this strategy perhaps your landlord would be glad to assist you! There are a few variations that could be used depending upon you and your owner. Do they desire the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The simplest way 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 may also try a ‘subject to’ assumption where you merely make payments while the property remains in the seller’s name.
You take over the first mortgage and get a 2nd 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. Rather than having the money sit down in a bank they can be collecting a high interest over two or three years with the remainder due in full at the end of the investment term.
When the term ends you need to be able to refinance the cost, or you can sell. Unless you strike an actual bad market the value of the house should have risen in that time.
Most mortgage lenders merely need to make a great investment. While your local bank may still be scared there are a lot of financial lenders that would want to make a deal. Financiers like real estate. The mortgage is mostly 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 estate if you default, they do not care what sort of money you make. Conclude the deal with a 2nd mortgage created with the seller. In case you default they can 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 may work together. In the event that they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.