Savvy real estate investors know that broken-down buildings can hide diamonds in the rough. This has never been truer than in a “hot” market like Seattle, Washington.
A 1901 home… more
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Are you thinking of investing in real estate? However, you don’t have enough money to accomplish this. In this article is a tip you may use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your very best guess is to find a land that the owner has great interest in offering it, whether because they are moving, divorce, or frustration with the people renting the place.
Actually, if you maybe currently renting and thinking about using this approach perhaps your landlord would be happy to assist you! There are a few variations that could be used depending on you and your vendor. Do they want the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The simplest method is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the first lender to presume the mortgage. If you can’t get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make payments while the property remains in the seller’s name.
You take over the original mortgage and make a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – 2 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 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 hit a real bad market the value of the home should have risen in that time.
Most mortgage lenders merely want to make a good investment. While your local bank could still be lacking confidence there are lots of financial lenders that would wish to make a deal. Financiers prefare real estate. The mortgage is usually around 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 don’t care what sort of money you make. Conclude the deal with a second mortgage done with the seller. If you default they can still foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the whole picture. It is better that seller and buyer can work hand in hand. In the event they can’t wait for a sale, you could still give them their initial price with a little overall flexibility on their part.