**This post sponsored & written by RCN Capital**
It’s no secret to real estate investors that numerous markets across the U.S. will continue to experience strong rental growth in 2017.… more
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Are you contemplating investing in property? But you don’t have enough cash to do this. Here is a tip you may 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 guess is to find a land that the owner has great desire for offering it, whether because they are moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you maybe currently renting and considering using this technique perhaps the owner would be glad to assist you! There are several variations that can be used depending upon you and your vendor. Do they desire the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The easiest way is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the original lender to assume the mortgage. If you cannot get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make obligations while the property remains in the seller’s name.
You take over the original 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 three years. Rather than having the money sit in a bank they can be collecting a high interest over two or three years with the rest due in full at the end of the term.
When the term draws to a close you should be able to refinance the cost, or else you could sell. Unless you struck a genuine bad market the value of the home should have risen in that time.
Most mortgage lenders merely want to make a great investment. While your local bank could still shy away there are a lot of financial lenders that would like to make a deal. Financiers like property investing. The mortgage is mostly around 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 kind of money you make. Conclude the deal with a second mortgage created with the seller. In case you default they could still foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can see the complete picture. It is better that seller and buyer can work hand in hand. In the event they can’t wait for a sale, you could still give them their initial price with a little versatility on their part.