Investing in a hot market can be exciting. Watching the values of your properties climb is absolutely intoxicating, and many investors spend a great deal of time and energy trying… more
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Are you contemplating investing in property? However you do not have enough money to do so. In this article is a tip you can use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your best gamble is to find a land that the owner has great interest in offering it, whether because of moving, divorce, or frustration with the folks renting the property.
Actually, if you are currently renting and considering using this technique perhaps your landlord would be happy to assist you! There are a few variations that may be used depending upon you and your owner. Do they want the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The simplest way is to take over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the first lender to assume the mortgage. If you cannot get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make payments while the property stays in the seller’s name.
You take over the first mortgage and create a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – 2 or three 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 term.
When the term ceases you need to be able to refinance the cost, or else you could sell. Unless you struck a real bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely want to make a great investment. While your local bank may still shy away there are plenty of financial lenders that would like to make a deal. Financiers prefare property investing. The mortgage is mostly 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 could still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can observe the entire picture. It is better that seller and buyer can work together. In the event that they can’t wait for a sale, you can still give them their asking price with a little versatility on their part.