ATTOM Data Solutions, released their Q2 U.S. Home Affordability Index on June 29, 2017, which shows the U.S. median home price of $253,000 in the second quarter of 2017 was… more
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Are you contemplating investing in real estate? However, you do not have enough money to do so. 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 interested (or even understand) the concept outlined. Your best gamble is to find a property that the owner has great interest in selling, whether because of moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you are currently renting and thinking about using this strategy perhaps your landlord would be happy to help you out! There are a few variations that could be used depending on you and your owner. Do they want 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 obligations – 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 house with the seller. Offer a high, interest-only payment for a short time period – two or three years. Rather than having the money sit in a bank they can be getting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term draws to a close you need to be able to refinance the cost, or you could sell. Unless you hit a real bad market the value of the house should have risen by then.
Most mortgage lenders merely need to make a great investment. While your local bank may still be scared there are plenty of financial lenders that would wish to make a deal. Financiers like property investing. The mortgage is mostly 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 land if you default, they do not care what sort of revenue you make. Conclude the deal with a 2nd mortgage done with the seller. If you default they could still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can observe the entire picture. It is good that seller and buyer can work together. In the event that they can’t wait for a sale, you can still give them their asking price with a little versatility on their part.