As other real estate investing markets are reaching their plateaus, the Kansas City, Missouri, market is just getting started. Thousands of potential real estate investments, residential and commercial, are waiting… more
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Are you contemplating investing in property? But you do not have enough money to do so. Here is a tip you are able to use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your very best guess is to find a land that the owner has great desire for offering it, whether because they are moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you maybe currently renting and considering using this strategy perhaps your landlord would be glad to help you out! There are several variations that could be used depending on you and your seller. Do they want the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The easiest way is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the original lender to assume the mortgage. If you cannot 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 first mortgage and make a 2nd 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. Rather than having the money stay in a bank they can 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 you can sell. Unless you strike a genuine 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 could still shy away there are a lot of financial lenders that would want to make a deal. Financiers prefare real estate. The mortgage is usually around 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 sort of income you make. Conclude the deal with a 2nd mortgage done with the seller. If you default they can still foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can see the whole picture. It is good that seller and buyer can work hand in hand. If they can’t wait for a sale, you may still give them their initial price with a little versatility on their part.