“It’s often smaller money decisions that people don’t think much about that, in the long run, makes it harder for people to reach financial success,” said Joe Correnti, senior vice president of Scottrade Brokerage Products. “That’s why it’s important to remain diligent about where your money is going and to constantly evaluate if your spending […]…
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Are you contemplating investing in real estate? But you do not have enough money to do so. In this article is a tip you are able to use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your very best wager is to locate a property that the owner has great interest in selling, whether because of moving, divorce, or they are frustrated with the people renting the place.
Actually, if you maybe currently renting and thinking of using this strategy perhaps the owner would be happy to assist you! There are a few variations that can be used depending upon you and your seller. Do they need the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The simplest method is to take over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the initial 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 obligations while the property stays in the seller’s name.
You take over the first mortgage and get a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – 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 rest due in full at the end of the investment term.
When the term ceases you should be able to refinance the cost, or perhaps you can sell. Unless you hit a real bad market the value of the house should have risen by then.
Most mortgage lenders merely want to make a good investment. While your local bank could still be lacking confidence there are lots of financial lenders that would wish to make a deal. Financiers like property investing. 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 land if you default, they don’t care what kind of income you make. Conclude the deal with a second mortgage done with the seller. In case 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 good that seller and buyer can work hand in hand. In the event that they can’t wait for a sale, you may still give them their initial price with a little versatility on their part.