When it comes to transparency in real estate, it seems like everyone boasts how they offer it, but few people are able to fully deliver on their promises. After all,… more
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Are you thinking of investing in property? However you don’t 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 interested (or even understand) the concept outlined. Your best gamble is to find a land that the owner has great desire for offering it, whether because they are moving, divorce, or frustration with the people renting the place.
Actually, if you are currently renting and considering using this technique perhaps the owner would be glad to help you out! There are some variations that may be used depending upon you and your owner. Do they need the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The easiest method is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to assume the mortgage. If you cannot get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make obligations while the property stays in the seller’s name.
You take over the original mortgage and create 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 three years. Instead of having the money sit in a bank they can be collecting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term draws to a close you need to be able to refinance the cost, or perhaps you could sell. Unless you hit a genuine bad market the value of the home should have risen in that time.
Most mortgage lenders merely need to make a good investment. While your local bank could still shy away there are lots of financial lenders that would like to make a deal. Financiers like real estate. 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 property if you default, they don’t care what sort of revenue you make. Complete the deal with a second mortgage created with the seller. If you default they can still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the complete picture. It is better that seller and buyer may work hand in hand. If they can’t wait for a sale, you could still give them their initial price with a little overall flexibility on their part.