There is such a boom of television broadcasts and investment managers pitching about all the great profits we can make doing fix and flips these days. Nearly all of what… more
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Are you contemplating investing in real estate? 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 along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your best guess is to find a land that the owner has great desire for selling, whether because they are moving, divorce, or frustration with tenants.
Actually, if you are currently renting and considering using this strategy perhaps the owner would be happy to help you out! There are some variations that could be used depending on you and your seller. Do they need the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The simplest way is to consider taking over their mortgage repayments – 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 also try a ‘subject to’ assumption where you merely make payments while the property remains 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 period – 2 or 3 years. Rather than having the money sit down in a bank they could be getting 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 need to be able to refinance the cost, or perhaps you could sell. Unless you strike an actual bad market the value of the home should have risen by then.
A lot of mortgage lenders merely need to make a good investment. While your local bank could still be lacking confidence 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 property, so as long as they know they get their money back in the value of the land if you default, they don’t care what sort of income you make. Complete the deal with a 2nd mortgage created with the seller. In case you default they can still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see the complete picture. It is good that seller and buyer can work hand in hand. 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.