Do you ever feel a little lost? Like you just can’t get your groove back? That’s not too surprising. The world is full of amazing opportunities. There are so many ways to make money in real estate investing, it’s easy for us to jump from one thing to another. Generally speaking, shiny object […]
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Are you contemplating investing in real estate? However, you don’t have enough money to do this. Here is a tip you can use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your best guess is to find a property that the owner has great interest in offering it, whether because of moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you are currently renting and thinking of using this approach perhaps the owner would be glad to help you out! There are several variations that could be used depending on you and your seller. Do they need 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 obligations – called ‘assuming’ the mortgage. You will need to be approved by the first lender to presume the mortgage. If you cannot get approved for an assumable mortgage you could also 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 get a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – two or three years. Rather than having the money sit in a bank they could be collecting a high interest over 2 or 3 years with the rest due in full at the end of the term.
When the term ends you ought to be able to refinance the cost, or you could sell. Unless you struck a real bad market the value of the property should have risen by then.
Most mortgage lenders merely need to make a good 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 around 60-70% of the value of the land, so as long as they know they get their money back in the value of the estate if you default, they don’t care what sort of money you make. Complete the deal with a second mortgage created with the seller. In case you default they could eventually foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can observe the entire picture. It is good that seller and buyer may work together. 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.