There’s no doubt about it, real estate is an inefficient investment by nature. Each investment and investor has its own unique characteristics and requires our most valuable resource…time!
Time is… more
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Are you contemplating investing in property? However, you do not have enough cash to do this. 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 very best guess is to locate a land that the owner has great interest in offering it, whether because they are moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you maybe currently renting and considering using this technique perhaps the owner would be happy to assist you! There are some variations that can be used depending on you and your seller. Do they desire the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The simplest way is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to assume the mortgage. If you cannot get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make obligations 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 frame – 2 or 3 years. Instead of having the money sit down 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 term.
When the term ends you should be able to refinance the cost, or perhaps you can sell. Unless you strike a genuine bad market the value of the house should have risen by then.
A lot of mortgage lenders merely want to make a great investment. While your local bank may still be lacking confidence there are lots of financial lenders that would wish to make a deal. Financiers like property investing. 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 property if you default, they don’t care what kind of money you make. Complete the deal with a 2nd mortgage done with the seller. If you default they could eventually foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can see the entire picture. It is better that seller and buyer can work together. In the event they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.