Being “underwater” is what a lot of homeowners experienced during the housing meltdown, but for people in Miami, that term is gaining a whole new meaning – one that is… more
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Are you thinking of investing in real estate? But you do not have enough money to accomplish 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 better gamble is to locate a property that the owner has great interest in selling, whether because of moving, divorce, or they are frustrated with tenants.
Actually, if you maybe currently renting and considering using this strategy perhaps the owner would be happy to help you out! There are several 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 from the monthly payments – maybe facing foreclosure?
The simplest way is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to assume the mortgage. If you cannot get approved for an assumable mortgage you may 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 make a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – 2 or three years. Rather than having the money sit in a bank they can be collecting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term draws to a close you should be able to refinance the cost, or else you can sell. Unless you hit a genuine bad market the value of the home should have risen in that time.
A lot of mortgage lenders merely need to make a good investment. While your local bank may still be scared there are lots of financial lenders that would wish to make a deal. Financiers like property investing. The mortgage is mostly 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 estate if you default, they don’t care what sort of income you make. Conclude the deal with a 2nd mortgage done with the seller. If you default they can still foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can observe the complete picture. It is good that seller and buyer can 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.