Most investors are familiar and find comfort when it comes to financing a single-family home, but become overwhelmed and intimidated when the conversation turns to financing a multifamily property. In this article, I would like to describe the differences between a residential and commercial loan and outline the different types of commercial lenders. What exactly […]…
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Are you thinking of investing in property? However, you do not have enough cash to accomplish this. In this article is a tip you may use as long as the property seller is willing to negotiate with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your best gamble is to locate a land that the owner has great interest in offering it, whether because they are moving, divorce, or they are frustrated with tenants.
Actually, if you maybe currently renting and thinking of using this approach perhaps your landlord would be happy to help you out! There are a few variations that may be used depending on you and your owner. Do they want the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The easiest way 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 can’t 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 second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – two or 3 years. Instead of having the money stay in a bank they could be collecting a high interest over two or three years with the remainder due in full at the end of the term.
When the term draws to a close you ought to be able to refinance the cost, or perhaps you can sell. Unless you struck a real bad market the value of the home should have risen in that time.
Most mortgage lenders merely need to make a great investment. While your local bank could still be scared there are a lot of financial lenders that would like to make a deal. Financiers prefare property investing. The mortgage is mostly 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 land if you default, they do not care what sort of money you make. Complete the deal with a 2nd mortgage done with the seller. If you default they can still foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can observe the whole picture. It is good that seller and buyer can work together. In the event that they can’t wait for a sale, you can still give them their asking price with a little overall flexibility on their part.