Today, July 15, 2017, is the last day to submit nominations for the Think Realty Honors, which will be awarded this October at the Think Realty National Conference & Expo… more
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Are you contemplating 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 person selling the property is willing to negotiate along.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your better wager is to find a land that the owner has great interest in selling, whether because they are moving, a divorce settlement, or frustration with tenants.
Actually, if you are currently renting and considering using this approach perhaps the owner would be glad to assist you! There are some variations that may be used depending on you and your owner. Do they need the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The easiest method is to consider taking 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 may also try a ‘subject to’ assumption where you merely make payments while the property remains in the seller’s name.
You take over the original mortgage and create 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 three years. Instead of having the money sit in a bank they can be collecting a high interest over 2 or 3 years with the rest due in full at the end of the investment term.
When the term ceases you should be able to refinance the cost, or perhaps you could sell. Unless you struck a genuine bad market the value of the property should have risen by then.
Most mortgage lenders merely want to make a great investment. While your local bank may still be lacking confidence there are lots of financial lenders that would wish to make a deal. Financiers like real estate. The mortgage is mostly based on 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 sort of money you make. Complete the deal with a second mortgage done with the seller. In case you default they can still foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the whole picture. It is good that seller and buyer may work hand in hand. If they can’t wait for a sale, you can still give them their initial price with a little versatility on their part.