Retiring Baby Boomers are enjoying a big boost in home equity that could help pay for their retirement. But a new survey shows there’s a surprising lack of understanding about… more
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Are you thinking of investing in real estate? However, you don’t have enough money to do so. In this article is a tip you are able to 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 best guess is to locate a property that the owner has great desire for selling, whether because they are moving, a divorce settlement, or frustration with tenants.
Actually, if you are currently renting and considering using this technique perhaps the owner would be happy to assist you! There are a few variations that may be used depending upon you and your seller. Do they need the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to assume 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 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 – two or 3 years. Rather than having the money stay in a bank they can be getting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term draws to a close you need to be able to refinance the cost, or perhaps you could sell. Unless you hit a real bad market the value of the home should have risen by then.
A lot of mortgage lenders merely want to make a good investment. While your local bank could still be scared there are lots of financial lenders that would wish to make a deal. Financiers like real estate. The mortgage is mostly around 60-70% of the value of the land, so as long as they understand 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 done with the seller. In case you default they can still foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the whole picture. It is better that seller and buyer may work hand in hand. If they can’t wait for a sale, you can still give them their initial price with a little overall flexibility on their part.