When you think of Seattle, Washington, you probably do not immediately think “affordability” in terms of its housing. After all, a metro area with a median home price of $610,000… more
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Are you thinking of investing in real estate? However you do not have enough cash to do 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 best guess is to locate a property that the owner has great desire for selling, whether because they are moving, a divorce settlement, or frustration with tenants.
Actually, if you are currently renting and thinking about using this technique perhaps the owner would be glad to assist you! There are several variations that can 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 simplest way is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the first lender to assume the mortgage. If you can’t 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 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. Rather than having the money stay in a bank they could be getting a high interest over 2 or 3 years with the remainder due in full at the end of the term.
When the term ceases you should be able to refinance the cost, or perhaps you could sell. Unless you hit an actual bad market the value of the property 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 a lot of financial lenders that would want to make a deal. Financiers like property investing. The mortgage is mostly 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 kind of money you make. Complete the deal with a 2nd mortgage done with the seller. If you default they could still foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can see the entire 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.