Attend any real estate investing group these days and you will hear at least one attendee holding forth about the joys of working with international investors flush with capital and… more
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Are you contemplating investing in real estate? But you do not have enough cash to accomplish this. In this article is a tip you can 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 guess is to locate a property that the owner has great desire for selling, whether because of moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you maybe currently renting and thinking of using this strategy perhaps the owner would be happy to assist you! There are several 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 take over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the first lender to assume 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 stays in the seller’s name.
You take over the first 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 period – 2 or three years. Instead of having the money sit down in a bank they could be getting a high interest over 2 or 3 years with the remainder due in full at the end of the term.
When the term draws to a close you need to be able to refinance the cost, or perhaps you could sell. Unless you strike an actual 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 could still be scared there are lots of financial lenders that would wish to make a deal. Financiers like real estate. The mortgage is usually around 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 kind of revenue you make. Complete the deal with a second mortgage done with the seller. If you default they can still foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can see the complete picture. It is better that seller and buyer can work together. In the event they can’t wait for a sale, you may still give them their asking price with a little overall flexibility on their part.