When undertaking any sort of task, your best chance of success will come if you set clearly defined goals and pick up some self-help educational material on the subject matter. Getting started with real estate investing is no different. Setting real estate investment goals involves taking a lot of factors into consideration to provide the […]…
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Are you thinking of investing in property? However, you do not have enough money to do this. Here is a tip you may use as long as the property seller is willing to negotiate with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your very best gamble is to locate a property that the owner has great interest in selling, whether because of moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you are currently renting and thinking about using this approach perhaps the owner would be glad to help you out! There are several variations that may be used depending upon you and your seller. Do they desire the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The simplest way is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the first lender to assume the mortgage. If you can’t get approved for an assumable mortgage you could as well 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 house with the seller. Offer a high, interest-only payment for a short time period – 2 or three years. Instead of having the money sit down in a bank they could be getting a high interest over 2 or 3 years with the remainder due in full at the end of the investment term.
When the term ceases you need to be able to refinance the cost, or you can sell. Unless you struck a genuine 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 may still shy away there are plenty of financial lenders that would wish to make a deal. Financiers prefare real estate. 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 don’t care what sort of income you make. Complete the deal with a 2nd mortgage done with the seller. If you default they could eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the complete picture. It is better that seller and buyer can work hand in hand. In the event they can’t wait for a sale, you could still give them their initial price with a little overall flexibility on their part.