A mentor used to say to me, “Don’t jump over hundreds to pick up dimes.” In other words, don’t try to save a few dimes if it will cost you… more
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Are you contemplating investing in real estate? However, you don’t have enough money to accomplish this. Here is a tip you are able to 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 better gamble is to locate a property that the owner has great interest in selling, whether because of moving, a divorce settlement, or frustration with tenants.
Actually, if you are currently renting and thinking about using this strategy perhaps your landlord would be glad to assist you! There are several variations that may be used depending upon you and your seller. Do they want the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The simplest method is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume the mortgage. If you cannot get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make payments while the property stays in the seller’s name.
You take over the first mortgage and create a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – two or three years. Instead of having the money sit in a bank they can be getting a high interest over 2 or 3 years with the remainder due in full at the end of the investment term.
When the term ends you should be able to refinance the cost, or perhaps you can sell. Unless you strike a real bad market the value of the property should have risen in that time.
A lot of mortgage lenders merely want to make a good investment. While your local bank could still be scared there are a lot of financial lenders that would want to make a deal. Financiers prefare property investing. The mortgage is usually 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 property if you default, they do not care what sort of revenue you make. Conclude the deal with a second mortgage created with the seller. If you default they could still foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can observe the entire picture. It is better that seller and buyer can work hand in hand. In the event they can’t wait for a sale, you can still give them their initial price with a little versatility on their part.