Derelict and distressed properties can lead to the downward spiral in property value for residential neighborhoods. When it comes to the commercial side of real estate investing, empty retail space… more
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Are you thinking of investing in property? But you don’t have enough cash to do this. Right here is a tip you may use as long as the property seller is willing to negotiate with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your best guess is to locate a property that the owner has great interest in selling, whether because of moving, divorce, or they are frustrated with tenants.
Actually, if you are currently renting and thinking of using this strategy perhaps your landlord would be happy to assist you! There are some variations that could 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 simplest method is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the initial 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 remains in the seller’s name.
You take over the first 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 period – 2 or 3 years. Rather than having the money stay in a bank they can be getting a high interest over two or three years with the rest due in full at the end of the term.
When the term ends you ought to be able to refinance the cost, or you could sell. Unless you struck a genuine bad market the value of the property 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 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 land, so as long as they know they get their money back in the value of the estate if you default, they don’t care what sort of revenue you make. Complete the deal with a 2nd mortgage created with the seller. In case you default they can eventually foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can observe the whole picture. It is better that seller and buyer may work hand in hand. In the event that they can’t wait for a sale, you can still give them their initial price with a little versatility on their part.