Sometimes a successful real estate investor stretches himself too thin by trying to be involved in too many types of investments. This “jack of all trades, master of none” approach… more
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Are you contemplating investing in property? However, you do not have enough cash to do this. In this article is a tip you are able to use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your very best wager is to find a land that the owner has great desire for selling, whether because of moving, divorce, or they are frustrated with the people renting the place.
Actually, if you are currently renting and thinking about using this approach perhaps the owner would be glad to assist you! There are a few variations that may be used depending upon you and your seller. Do they desire the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The easiest method is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the original lender to presume the mortgage. If you can’t get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make payments 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 period – 2 or three 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 perhaps you could sell. Unless you strike a genuine bad market the value of the home should have risen in that time.
A lot of mortgage lenders merely need to make a good investment. While your local bank could still shy away there are a lot of financial lenders that would want 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 estate if you default, they do not care what sort of income you make. Complete the deal with a 2nd mortgage done with the seller. If you default they could still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the entire picture. It is good that seller and buyer may work hand in hand. If they can’t wait for a sale, you can still give them their asking price with a little versatility on their part.