If you own rental properties in New York City, you might want to tell your tenants to leave the doors unlocked this week. The New York City Housing Authority (NYCHA)… more
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Are you contemplating investing in real estate? However, you don’t have enough money to do so. Here is a tip you can 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 gamble is to locate a property that the owner has great desire for selling, whether because they are moving, divorce, or they are frustrated with the people renting the place.
Actually, if you maybe currently renting and considering using this technique perhaps your landlord would be glad to assist you! There are a few variations that could be used depending upon you and your seller. Do they need the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The simplest way is to consider taking over their mortgage payments – 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 could as well try a ‘subject to’ assumption where you merely make obligations while the property stays 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 – 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 investment term.
When the term ends you ought to be able to refinance the cost, or else you can sell. Unless you struck an actual bad market the value of the house 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 plenty of financial lenders that would want to make a deal. Financiers like real estate. The mortgage is usually around 60-70% of the value of the property, so as long as they understand they get their money back in the value of the property if you default, they do not care what kind of revenue you make. Conclude the deal with a second mortgage created with the seller. In case you default they can eventually foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the whole picture. It is good that seller and buyer may work hand in hand. If they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.