As landlords, we are unknowingly conducting our business in a Perfect Storm. By dictionary definition, this occurs when a rare combination of circumstances aggravates a situation drastically.
There are several… more
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Are you thinking of investing in real estate? However, you don’t have enough cash to do this. Here 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 willing (or even understand) the concept outlined. Your better gamble is to locate a land that the owner has great interest in selling, whether because of moving, divorce, or they are frustrated with the people renting the place.
Actually, if you are currently renting and thinking of using this strategy perhaps the owner would be happy to help you out! There are some variations that may be used depending on you and your vendor. 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 repayments – called ‘assuming’ the mortgage. You will have to be approved by the first lender to presume the mortgage. If you cannot get approved for an assumable mortgage you could 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 original mortgage and make 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 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 you could sell. Unless you strike an actual bad market the value of the home should have risen by then.
A lot of mortgage lenders merely want to make a great investment. While your local bank may still shy away there are plenty of financial lenders that would wish 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 know they get their money back in the value of the land if you default, they do not care what kind of money you make. Conclude the deal with a second mortgage done with the seller. If you default they can 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 may still give them their asking price with a little overall flexibility on their part.