Some landlords misinterpret, to their own disadvantage, the housing laws created to prevent discrimination based on familial status. State and local health and safety codes often set maximum limits on… more
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Are you thinking of investing in property? However, you don’t have enough cash to accomplish this. Here is a tip you may use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your very best gamble is to locate a property that the owner has great interest in selling, whether because of moving, divorce, or frustration with the folks renting the property.
Actually, if you maybe currently renting and considering using this technique perhaps your landlord would be glad to assist you! There are some variations that could 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 simplest method is to take over their mortgage payments – 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 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 first mortgage and create a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – 2 or 3 years. Instead of having the money sit in a bank they could be collecting a high interest over 2 or 3 years with the remainder due in full at the end of the investment term.
When the term ceases you should be able to refinance the cost, or you could sell. Unless you hit an actual bad market the value of the property should have risen by then.
Most mortgage lenders merely need to make a great investment. While your local bank may still be lacking confidence there are lots of financial lenders that would like to make a deal. Financiers prefare real estate. The mortgage is usually 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 estate if you default, they don’t care what sort of money you make. Complete the deal with a 2nd mortgage created with the seller. If you default they can eventually foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can see the entire 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.