Real estate investors know all about waste and how much it can hurt an investing business. Gary Harper, founder and CEO of Sharper Business Solutions, knows all about how to… more
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Are you contemplating investing in property? However, you do not have enough cash to do this. Right here is a tip you may use as long as the property seller is willing to negotiate with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your best guess is to find a land that the owner has great interest in offering it, whether because they are moving, divorce, or they are frustrated with the folks renting the property.
Actually, if you are currently renting and thinking of using this technique perhaps the owner would be glad to help you out! There are a few variations that could be used depending upon you and your seller. Do they want the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The simplest method is to take over their mortgage repayments – 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 as well 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 make a second 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. Rather than having the money stay 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 term.
When the term ends you ought to be able to refinance the cost, or else you could sell. Unless you hit a real bad market the value of the home should have risen by then.
A lot of mortgage lenders merely want to make a good investment. While your local bank could still shy away there are lots 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 land, so as long as they know they get their money back in the value of the estate if you default, they do not care what kind of income you make. Conclude the deal with a second mortgage created with the seller. In case 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 complete picture. It is good that seller and buyer can work together. In the event that they can’t wait for a sale, you could still give them their initial price with a little versatility on their part.