Owning rental properties is always an adventure if you choose to manage those properties personally. While no two days will ever be quite the same, there are some basic processes… more
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Are you thinking of investing in real estate? However, you do not have enough money to do so. Here is a tip you are able to 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 better guess is to locate a land that the owner has great interest in offering it, whether because of moving, a divorce settlement, or they are frustrated with tenants.
Actually, if you are currently renting and thinking about using this technique perhaps the owner would be glad to help you out! There are some variations that can be used depending upon you and your vendor. Do they need the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The easiest way is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the first lender to assume the mortgage. If you can’t get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make repayments while the property stays in the seller’s name.
You take over the original 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 – two or 3 years. Instead of having the money stay in a bank they could be collecting a high interest over 2 or 3 years with the rest due in full at the end of the term.
When the term ends you need to be able to refinance the cost, or perhaps you can sell. Unless you struck a real bad market the value of the house should have risen by then.
Most mortgage lenders merely want to make a great investment. While your local bank may still shy away there are lots of financial lenders that would want to make a deal. Financiers prefare property investing. The mortgage is usually around 60-70% of the value of the land, so as long as they know they get their money back in the value of the estate if you default, they do not care what sort of money you make. Complete the deal with a 2nd mortgage done with the seller. If you default they can still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can observe the whole picture. It is better that seller and buyer may work hand in hand. If they can’t wait for a sale, you can still give them their asking price with a little versatility on their part.