You know what separates struggling investors from great investors? 2 words. Good Math. I’m a numbers guy. You live by the numbers or you die by them in the real estate game. Short of divine intervention, no amount of luck, sorcery or practical know-how can save you from a bad property if the numbers simply […]
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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 may 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 very best guess is to find a land that the owner has great interest in offering it, whether because they are moving, divorce, or frustration with tenants.
Actually, if you maybe currently renting and thinking about using this approach perhaps the owner would be happy to assist you! There are some variations that may be used depending upon you and your seller. Do they want the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The simplest method is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the original lender to presume 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 obligations while the property stays in the seller’s name.
You take over the first mortgage and get a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – 2 or 3 years. Instead of having the money sit down in a bank they could be collecting a high interest over two or three years with the remainder due in full at the end of the investment term.
When the term ends you ought to be able to refinance the cost, or you could sell. Unless you hit a genuine bad market the value of the property should have risen in that time.
A lot of mortgage lenders merely want to make a great investment. While your local bank may still be lacking confidence there are plenty of financial lenders that would want to make a deal. Financiers like real estate. The mortgage is mostly around 60-70% of the value of the property, 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 revenue you make. Conclude the deal with a second mortgage created with the seller. If you default they could eventually 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 they can’t wait for a sale, you could still give them their asking price with a little versatility on their part.