The new “sharing economy” may create some tax confusion this year. People who are new to the world of Airbnb, Uber, WeWork and other web-based data-driven payment portals may find… more
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Are you thinking of investing in property? However you don’t have enough money to accomplish this. Here is a tip you can use as long as the person selling the property is willing to negotiate with you.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your very best gamble is to find a property that the owner has great interest in offering it, whether because they are moving, divorce, or they are frustrated with the people renting the place.
Actually, if you maybe currently renting and thinking about using this approach perhaps the owner would be happy to assist you! There are a few variations that can be used depending upon you and your vendor. Do they desire the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The simplest way is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the first 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 remains in the seller’s name.
You take over the first mortgage and create 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 3 years. Instead of having the money stay in a bank they can be collecting a high interest over 2 or 3 years with the rest due in full at the end of the term.
When the term draws to a close you need to be able to refinance the cost, or perhaps 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 shy away there are lots of financial lenders that would wish to make a deal. Financiers prefare real estate. 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 land if you default, they do not care what sort of income you make. Conclude the deal with a 2nd mortgage created with the seller. If you default they can still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can observe the entire picture. It is good that seller and buyer can work together. In the event that they can’t wait for a sale, you may still give them their initial price with a little versatility on their part.