When real estate investors are looking for capital to fund their deals, the only thing as important as speed is creativity. Most real estate investments don’t fit into the neat… more
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Are you thinking of investing in real estate? However, you don’t have enough money to accomplish this. In this article is a tip you can 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 wager is to locate a land that the owner has great desire for offering it, whether because they are moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you maybe currently renting and thinking of using this technique 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 need the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The easiest method is to consider taking over their mortgage obligations – 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 repayments while the property stays in the seller’s name.
You take over the original mortgage and get a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – two or three years. Rather than having the money stay 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 should be able to refinance the cost, or else you can sell. Unless you struck a real bad market the value of the house should have risen by then.
Most mortgage lenders merely need to make a great investment. While your local bank may 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 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 estate if you default, they don’t care what kind of revenue you make. Conclude the deal with a 2nd mortgage created with the seller. If you default they can eventually foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can see the whole 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 asking price with a little overall flexibility on their part.