Are your properties adequately insured? How much coverage is enough coverage when it comes to liability insurance? Shawn Woedl of the National Real Estate Insurance Group (NREIG) sat down with… more
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Are you contemplating investing in real estate? But you don’t have enough money to do this. Here is a tip you can use as long as the person selling the property is willing to negotiate with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your best gamble is to find a land that the owner has great interest in offering it, whether because of moving, divorce, or they are frustrated with tenants.
Actually, if you are currently renting and thinking about using this technique perhaps your landlord would be glad to help you out! There are some variations that can be used depending upon you and your vendor. Do they want the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The easiest method is to take over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the first 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 – 2 or 3 years. Rather than having the money sit in a bank they can be getting a high interest over 2 or 3 years with the rest due in full at the end of the investment term.
When the term ends you ought to be able to refinance the cost, or perhaps you could sell. Unless you hit an actual bad market the value of the property should have risen in that time.
A lot of mortgage lenders merely want to make a good investment. While your local bank could still be scared there are lots of financial lenders that would like to make a deal. Financiers prefare property investing. The mortgage is usually based on 60-70% of the value of the property, so as long as they know they get their money back in the value of the property if you default, they do not care what sort of revenue you make. Conclude the deal with a second mortgage created with the seller. In case you default they could still foreclose on the property and sell it, paying down the existing mortgage with 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 overall flexibility on their part.