The fastest moving growth market for real estate investing is the area of short term rentals. It’s becoming more popular because of the popularity of the listing site Airbnb. Some of you may have remembered when I shared with you guys in the blog post, Successfully Investing in Short Term Airbnb Rentals , what a short term rental was […]…
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Are you thinking of investing in real estate? However you don’t have enough cash to accomplish this. Right here is a tip you can use as long as the person selling the property is willing to negotiate with you.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your very best gamble is to find a land that the owner has great interest in offering it, whether because of moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you are currently renting and considering using this strategy perhaps your landlord would be happy to help you out! There are some variations that can 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 – maybe facing foreclosure?
The simplest method is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the initial 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 repayments while the property stays in the seller’s name.
You take over the first mortgage and create a second 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. Rather than having the money stay 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 ceases you need to be able to refinance the cost, or perhaps you could sell. Unless you hit a real 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 could still be lacking confidence there are a lot of financial lenders that would wish 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 understand they get their money back in the value of the land if you default, they don’t care what kind of money you make. Complete the deal with a 2nd mortgage created with the seller. If you default they could still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can observe the entire picture. It is good that seller and buyer can work hand in hand. In the event that they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.