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Are you contemplating investing in real estate? However you do not have enough money to do so. In this article is a tip you can 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 very best wager is to locate a property that the owner has great interest in selling, whether because of moving, divorce, or frustration with tenants.
Actually, if you are currently renting and thinking of using this approach perhaps the owner would be happy to help you out! There are some variations that can be used depending on you and your seller. Do they need the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the first 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 repayments while the property remains 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 3 years. Instead of having the money sit down 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 ends you need to be able to refinance the cost, or else you can sell. Unless you struck a real bad market the value of the house should have risen by then.
Most mortgage lenders merely need to make a good investment. While your local bank could still be scared there are plenty of financial lenders that would want to make a deal. Financiers prefare property investing. The mortgage is mostly 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 property if you default, they don’t care what sort of income you make. Complete the deal with a 2nd mortgage done with the seller. In case you default they can still foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can observe the complete picture. It is better that seller and buyer can work together. In the event that they can’t wait for a sale, you can still give them their asking price with a little overall flexibility on their part.