Almost every full-time investor remembers the moment that they realized that real estate investing was actually going to change their lives. Sure, you hear other people talk about it. You… more
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Are you contemplating investing in property? However you don’t have enough cash to accomplish this. In this article is a tip you may use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your best wager is to locate a property that the owner has great desire for selling, whether because of moving, divorce, or frustration with the folks renting the property.
Actually, if you are currently renting and thinking of using this approach perhaps the owner would be happy to help you out! There are a few variations that may be used depending on you and your vendor. Do they need the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The simplest method is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the original lender to assume the mortgage. If you can’t get approved for an assumable mortgage you could also 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 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 3 years. Rather than having the money stay in a bank they can be collecting a high interest over 2 or 3 years with the rest due in full at the end of the investment term.
When the term ends you should be able to refinance the cost, or perhaps you could sell. Unless you struck a genuine bad market the value of the home should have risen in that time.
Most 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 property investing. The mortgage is mostly 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 property 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 can still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see 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 may still give them their initial price with a little overall flexibility on their part.