You’ve heard the phrase “Your network is your net worth” in terms of real estate marketing and email marketing, but when Charles Blair, “Mad Scientist” and founder of the Baltimore… more
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Are you thinking of investing in property? But you do not have enough money to do so. 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 better wager is to locate a property that the owner has great desire for selling, whether because they are moving, divorce, or they are frustrated with the folks renting the property.
Actually, if you are currently renting and considering using this approach perhaps your landlord would be happy to help you out! There are a few variations that may be used depending upon you and your vendor. Do they need the market price or are they just eager to get out of 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 presume the mortgage. If you can’t get approved for an assumable mortgage you may 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 original mortgage and make a second 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 sit down in a bank they can be getting a high interest over two or three years with the remainder due in full at the end of the term.
When the term ends you ought to be able to refinance the cost, or perhaps you could sell. Unless you struck an actual bad market the value of the house 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 wish to make a deal. Financiers prefare property investing. The mortgage is usually 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 property if you default, they don’t care what sort of money you make. Complete the deal with a 2nd mortgage created with the seller. In case you default they could eventually foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can observe 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 overall flexibility on their part.