The past few weeks have been a roller coaster for me that included both endings and beginnings. I lost a good friend a couple of weeks ago after a long illness. Her memorial was held over the weekend, and yet here I am. Jumping right back in to my life; to all the things […]
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Are you contemplating investing in real estate? But 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 with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your very best wager is to locate a land that the owner has great desire for offering it, whether because they are moving, divorce, or they are frustrated with the people renting the place.
Actually, if you are currently renting and thinking about using this strategy perhaps the owner would be glad to help you out! There are several variations that can be used depending on you and your owner. Do they want the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The easiest method is to take over their mortgage payments – 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 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 first mortgage and get 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 3 years. Instead of 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 draws to a close you need to be able to refinance the cost, or perhaps you could sell. Unless you hit an actual bad market the value of the home should have risen by then.
A lot of mortgage lenders merely want to make a good investment. While your local bank could still be lacking confidence there are lots of financial lenders that would like to make a deal. Financiers like 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 land if you default, they don’t care what kind of money you make. Conclude the deal with a second mortgage created with the seller. If 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.