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Are you contemplating investing in real estate? But you do not have enough cash to accomplish this. In this article is a tip you may use as long as the person selling the property is willing to negotiate with you.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your very best gamble is to find a property that the owner has great desire for selling, whether because of moving, a divorce settlement, or they are frustrated with tenants.
Actually, if you are currently renting and thinking about using this technique perhaps your landlord would be glad to help you out! There are a few variations that may be used depending upon you and your owner. Do they desire the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The easiest way is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the first lender to assume the mortgage. If you can’t get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make payments while the property stays in the seller’s name.
You take over the original 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 frame – 2 or 3 years. Rather than having the money sit in a bank they can be getting a high interest over 2 or 3 years with the remainder due in full at the end of the investment term.
When the term ends you need to be able to refinance the cost, or perhaps you can sell. Unless you struck a genuine bad market the value of the house should have risen in that time.
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 like real estate. 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 land if you default, they do not care what sort of income you make. Complete the deal with a second mortgage done with the seller. In case you default they can still foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can see the whole picture. It is better 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.