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Are you thinking of investing in real estate? But you don’t have enough money to do so. Here is a tip you are able to use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your very best wager is to locate a land that the owner has great desire for selling, whether because of moving, divorce, or frustration with tenants.
Actually, if you maybe currently renting and thinking of using this strategy perhaps the owner would be happy to assist you! There are some variations that can be used depending upon you and your seller. Do they desire the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The simplest way is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the first lender to assume the mortgage. If you cannot get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make payments 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 house with the seller. Offer a high, interest-only payment for a short time period – two or three years. Instead of having the money sit down in a bank they can be collecting a high interest over two or three years with the remainder due in full at the end of the term.
When the term draws to a close you should be able to refinance the cost, or you could sell. Unless you hit an actual bad market the value of the property should have risen by then.
Most mortgage lenders merely need to make a good investment. While your local bank may still shy away there are lots of financial lenders that would wish to make a deal. Financiers prefare real estate. The mortgage is usually around 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 income you make. Conclude the deal with a 2nd mortgage created 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 may work together. In the event that they can’t wait for a sale, you can still give them their asking price with a little overall flexibility on their part.