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Are you contemplating investing in real estate? However you do not have enough cash to do so. Here is a tip you are able to use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your very best wager is to locate a land that the owner has great desire for selling, whether because they are moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you maybe currently renting and thinking about using this strategy perhaps your landlord would be happy to help you out! There are several variations that can be used depending on you and your owner. Do they want the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The simplest method is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the first lender to assume the mortgage. If you cannot get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make repayments while the property stays in the seller’s name.
You take over the original 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 2 or 3 years with the remainder due in full at the end of the investment term.
When the term ceases you need to be able to refinance the cost, or else you could sell. Unless you struck a genuine bad market the value of the property should have risen in that time.
A lot of mortgage lenders merely want to make a great investment. While your local bank could still be scared there are plenty of financial lenders that would want to make a deal. Financiers like property investing. The mortgage is usually based on 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. Complete the deal with a 2nd mortgage done with the seller. In case 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 whole picture. It is better that seller and buyer can work together. If they can’t wait for a sale, you may still give them their asking price with a little versatility on their part.