“The real estate industry is slow to adopt new technology”. How many times have you heard that statement? While there may be some truth to it from a relative perspective, there are so many exciting things happening in the world …
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Are you thinking of investing in real estate? However you don’t have enough money to do so. Here 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 very best wager is to find a property that the owner has great desire for offering it, whether because they are moving, divorce, or they are frustrated with the folks renting the property.
Actually, if you are currently renting and thinking of using this strategy perhaps your landlord would be glad to assist you! There are several variations that may be used depending upon you and your vendor. Do they need the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The easiest method is to take over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the first 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 repayments while the property remains in the seller’s name.
You take over the original mortgage and create 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 three years. Rather than having the money sit down in a bank they could be collecting a high interest over 2 or 3 years with the rest due in full at the end of the term.
When the term ceases you ought to 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 be lacking confidence there are plenty 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 know they get their money back in the value of the estate if you default, they don’t care what kind of income you make. Conclude the deal with a second mortgage created 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 better that seller and buyer can work hand in hand. In the event they can’t wait for a sale, you may still give them their asking price with a little overall flexibility on their part.