You need a lot of patience when it comes to dealing with tenants who don’t know as much as you do. I am a property manager and every single day I talk to at least one tenant. Many days, dealing with tenants takes up the majority of my time. Sometimes the tenant has […]
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Are you thinking of investing in real estate? But you do not have enough cash to do so. 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 every seller will be willing (or even understand) the concept outlined. Your better wager is to find a property that the owner has great interest in offering it, whether because of moving, a divorce settlement, or they are frustrated 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 help you out! There are some variations that may be used depending upon you and your owner. Do they desire 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 obligations – called ‘assuming’ the mortgage. You will have to be approved by the first lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make obligations while the property stays in the seller’s name.
You take over the original mortgage and create a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – 2 or 3 years. Instead of having the money sit 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 investment term.
When the term ends you ought to be able to refinance the cost, or perhaps you can sell. Unless you struck a genuine bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely want to make a good investment. While your local bank may still shy away there are a lot of financial lenders that would want to make a deal. Financiers prefare real estate. The mortgage is usually based on 60-70% of the value of the land, so as long as they understand they get their money back in the value of the property if you default, they don’t care what kind of money 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, paying down the existing mortgage in the proceeds.
Now you can observe the whole picture. It is better that seller and buyer can work together. If they can’t wait for a sale, you could still give them their initial price with a little versatility on their part.