You may be the expert when it comes to your personal rental property portfolio, but that does not mean that you need to personally micromanage every aspect of the marketing… more
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Are you contemplating investing in property? But you do not have enough cash to do this. In this article is a tip you may 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 best wager is to locate a property that the owner has great desire for selling, whether because they are moving, divorce, or frustration with the people renting the place.
Actually, if you maybe currently renting and thinking about using this approach perhaps your landlord would be happy to assist you! There are some variations that may be used depending on you and your seller. Do they desire the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The simplest way is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to presume the mortgage. If you can’t get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make obligations 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 – two or 3 years. Rather than having the money stay in a bank they could be collecting a high interest over two or three years with the remainder due in full at the end of the investment term.
When the term draws to a close you ought to be able to refinance the cost, or else you could sell. Unless you struck an actual bad market the value of the house should have risen in that time.
Most mortgage lenders merely want to make a great investment. While your local bank may still be scared there are lots of financial lenders that would like to make a deal. Financiers prefare property investing. The mortgage is usually 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 land if you default, they do not care what kind of income you make. Complete the deal with a second mortgage done with the seller. In case you default they could eventually foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see the whole picture. It is good that seller and buyer may work hand in hand. In the event that they can’t wait for a sale, you can still give them their asking price with a little overall flexibility on their part.