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Are you contemplating investing in property? But you don’t have enough money to do so. Here is a tip you may use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your better gamble is to locate a property that the owner has great desire for offering it, whether because they are moving, divorce, or they are frustrated with tenants.
Actually, if you are currently renting and thinking about using this technique perhaps the owner would be happy to assist you! There are a few variations that could be used depending on you and your seller. Do they want the market price or are they just desperate 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 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 remains in the seller’s name.
You take over the first mortgage and get a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – two or three years. Instead of having the money sit in a bank they can be collecting a high interest over 2 or 3 years with the remainder due in full at the end of the investment term.
When the term ceases you ought to be able to refinance the cost, or you could sell. Unless you strike an actual bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely need to make a great investment. While your local bank could still be lacking confidence there are a lot of financial lenders that would wish to make a deal. Financiers prefare property investing. The mortgage is mostly based on 60-70% of the value of the property, so as long as they know they get their money back in the value of the land if you default, they don’t care what kind of income you make. Complete the deal with a second mortgage done with the seller. In case you default they could still foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can see the complete picture. It is good that seller and buyer may work together. If they can’t wait for a sale, you could still give them their initial price with a little versatility on their part.