It’s become a regular headline: Low housing inventory is responsible for fewer sales. With slow but steady economic growth, low unemployment, consumer optimism, and strong demand for housing, it seems… more
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Are you thinking of investing in property? However, you do not have enough money to do this. In this article is a tip you may use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your best wager is to find a land that the owner has great desire for selling, whether because of moving, a divorce settlement, or frustration with the people renting the place.
Actually, if you maybe currently renting and thinking of using this technique perhaps the owner would be glad to help you out! There are several variations that can be used depending upon you and your vendor. 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 take over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the original lender to assume the mortgage. If you can’t get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make repayments while the property stays in the seller’s name.
You take over the first mortgage and make a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – two or three years. Instead of having the money sit in a bank they could be getting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term draws to a close you should be able to refinance the cost, or else you can sell. Unless you strike an actual bad market the value of the home should have risen by then.
Most mortgage lenders merely need to make a good investment. While your local bank could still be lacking confidence there are lots of financial lenders that would like to make a deal. Financiers prefare property investing. The mortgage is usually based on 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 don’t care what kind of income you make. Complete the deal with a 2nd mortgage done with the seller. In case you default they can eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can see the entire picture. It is good that seller and buyer can work together. If they can’t wait for a sale, you can still give them their initial price with a little versatility on their part.