According to a recent report from ATTOM Data Solutions, one in every four housing markets in the United States are becoming less affordable all the time. ATTOM’s Q1 2017 U.S.… more
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Are you thinking of investing in property? However, you don’t have enough cash to accomplish this. Here is a tip you may use as long as the property seller is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your better wager is to find a land that the owner has great desire for selling, whether because of moving, a divorce settlement, or frustration with the people renting the place.
Actually, if you are currently renting and considering using this technique perhaps the owner would be happy to help you out! There are some variations that may be used depending on you and your vendor. Do they want the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The easiest method is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the first lender to presume the mortgage. If you cannot get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make payments while the property stays in the seller’s name.
You take over the original mortgage and create a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – two or three years. Instead of having the money stay in a bank they can be getting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term ceases you should be able to refinance the cost, or else you could sell. Unless you strike an actual bad market the value of the home should have risen by then.
A lot of mortgage lenders merely want to make a great investment. While your local bank may still shy away there are lots 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 land, so as long as they know they get their money back in the value of the land if you default, they do not care what sort of revenue you make. Complete the deal with a second mortgage created with the seller. If you default they can eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the whole picture. It is good that seller and buyer may work hand in hand. In the event they can’t wait for a sale, you can still give them their asking price with a little overall flexibility on their part.