Pretend for just a minute that it’s 10 years from now. It’s 2027. Think back to a decade ago when you had big plans for the future. It would be safe to say you had every detail of your future life planned out (at least in your mind). You knew… Exactly how much income […]
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Are you thinking of investing in real estate? But you don’t have enough cash to accomplish this. Here is a tip you are able to use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your very best gamble is to locate a property that the owner has great interest in selling, whether because of moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you are currently renting and thinking of using this technique perhaps the owner would be happy to assist you! There are a few variations that could be used depending on you and your seller. Do they want the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The simplest method is to consider taking over their mortgage obligations – 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 could as well 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 second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – 2 or 3 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 rest due in full at the end of the investment term.
When the term ceases you should be able to refinance the cost, or you could sell. Unless you struck a genuine bad market the value of the house should have risen by then.
Most mortgage lenders merely want to make a great investment. While your local bank may still shy away there are lots of financial lenders that would want to make a deal. Financiers like property investing. The mortgage is usually around 60-70% of the value of the property, 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. Conclude the deal with a 2nd mortgage created with the seller. If you default they could eventually foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can observe the complete picture. It is better that seller and buyer may work hand in hand. In the event that they can’t wait for a sale, you may still give them their initial price with a little versatility on their part.