According to WalletHub’s “2017 Property Taxes by State Report,” the average American household spends more than $2,000 on property taxes each year. Perhaps of even greater interest to real estate… more
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Are you contemplating investing in property? However you don’t have enough cash to do so. Here 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 interested (or even understand) the concept outlined. Your better wager is to find a property that the owner has great desire for selling, whether because they are moving, a divorce settlement, or they are frustrated with tenants.
Actually, if you are currently renting and thinking of using this strategy perhaps the owner would be happy to help you out! There are several variations that could be used depending on you and your owner. Do they need the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The simplest method is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the original lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make repayments 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 house with the seller. Offer a high, interest-only payment for a short time frame – 2 or 3 years. Rather than having the money sit down in a bank they can be getting a high interest over 2 or 3 years with the rest due in full at the end of the term.
When the term draws to a close you should be able to refinance the cost, or else you could sell. Unless you strike an actual bad market the value of the house should have risen in that time.
Most mortgage lenders merely need to make a good investment. While your local bank may still shy away there are a lot of financial lenders that would wish to make a deal. Financiers prefare real estate. 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 property if you default, they do not care what sort of revenue you make. Conclude the deal with a 2nd mortgage done with the seller. In case you default they could eventually foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can observe the whole picture. It is better that seller and buyer may work together. If they can’t wait for a sale, you could still give them their asking price with a little versatility on their part.