How would it affect your real estate investing if you could not deduct the mortgage interest on the property loan off your taxes each year? If you purchased one or… more
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Are you thinking of investing in real estate? But you don’t have enough money to do this. In this article is a tip you can use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your best guess is to locate a land that the owner has great desire for offering it, whether because of moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you maybe currently renting and thinking about using this strategy perhaps the owner would be glad to help you out! There are several variations that could be used depending upon you and your owner. Do they want the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The easiest way is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to assume the mortgage. If you can’t get approved for an assumable mortgage you may 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 property with the seller. Offer a high, interest-only payment for a short time frame – two or three years. Rather than having the money sit 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 ceases you need to be able to refinance the cost, or else you could sell. Unless you hit a genuine bad market the value of the home should have risen by then.
A lot of mortgage lenders merely want to make a great investment. While your local bank could still shy away there are lots of financial lenders that would wish to make a deal. Financiers like real estate. The mortgage is mostly 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 land if you default, they do not care what kind of income you make. Complete the deal with a 2nd mortgage created 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 may work together. If they can’t wait for a sale, you could still give them their initial price with a little overall flexibility on their part.