It is common knowledge that the housing market is cyclical, but while most investors agree this is the case, they do not have firm plans in place to help them… more
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Are you contemplating investing in real estate? However you do not 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 property that the owner has great interest in selling, whether because they are moving, a divorce settlement, or they are frustrated with tenants.
Actually, if you maybe currently renting and thinking about using this approach perhaps your landlord would be glad to assist you! There are some variations that could be used depending upon you and your seller. Do they need the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The easiest way is to take over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the original lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make repayments while the property stays in the seller’s name.
You take over the first mortgage and make a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – two or 3 years. Instead of 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 ends you ought to be able to refinance the cost, or perhaps you can sell. Unless you hit an actual bad market the value of the house should have risen by then.
Most 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 want 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 understand they get their money back in the value of the estate if you default, they don’t care what kind of revenue you make. Conclude the deal with a 2nd mortgage done with the seller. In case you default they could still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can observe the complete picture. It is good that seller and buyer may work hand in hand. If they can’t wait for a sale, you could still give them their initial price with a little versatility on their part.