When real estate investors get started in the business, they often are hindered in their trek toward success by preconceived notions about the “right” kinds of deals and markets. Think… more
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Are you contemplating investing in real estate? However you don’t have enough money to do this. Right here is a tip you can use as long as the property seller is willing to negotiate along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your very best wager is to find a land that the owner has great interest in offering it, whether because of moving, divorce, or frustration with the people renting the place.
Actually, if you are currently renting and thinking of using this approach perhaps the owner would be glad to help you out! There are a few variations that could be used depending on you and your vendor. Do they need the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The easiest way is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the original lender to assume the mortgage. If you can’t get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make repayments while the property remains 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 period – two or 3 years. Rather than having the money sit in a bank they could be collecting a high interest over two or three years with the rest due in full at the end of the term.
When the term ceases you need to be able to refinance the cost, or perhaps you could sell. Unless you hit a real bad market the value of the property should have risen in that time.
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 real estate. The mortgage is mostly 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 don’t care what kind of income you make. Conclude the deal with a second mortgage created with the seller. If you default they can still foreclose on the property and sell it, paying down 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 could still give them their asking price with a little overall flexibility on their part.