I’ll never forget the lady who came up to me at the Think Realty conference in Baltimore, Maryland, this past June. You could see the look of despair all over… more
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Are you thinking of investing in real estate? However, you don’t have enough cash to do so. Here is a tip you can use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your better gamble is to locate a land that the owner has great interest in offering it, whether because of moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you are currently renting and considering using this strategy perhaps the owner would be happy to assist you! There are several variations that could be used depending on you and your owner. Do they want the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The easiest method is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to assume the mortgage. If you cannot get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make payments while the property remains in the seller’s name.
You take over the original mortgage and get a second mortgage on the remaining cost of the house 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 can be collecting 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 ought to be able to refinance the cost, or perhaps you can sell. Unless you strike a real bad market the value of the property should have risen in that time.
Most mortgage lenders merely need to make a great investment. While your local bank could still shy away there are plenty of financial lenders that would like to make a deal. Financiers prefare real estate. The mortgage is mostly around 60-70% of the value of the property, so as long as they know they get their money back in the value of the property if you default, they do not care what kind of income you make. Complete the deal with a second 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 see the entire picture. It is better that seller and buyer can work hand in hand. In the event that they can’t wait for a sale, you could still give them their asking price with a little versatility on their part.