Hong Kong is considering something pretty unusual to help deal with a massive shortage of real estate for development and housing: an “underground excavation.” While you might cringe at the… more
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Are you thinking of investing in real estate? However you don’t have enough money to accomplish this. Right here is a tip you can use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your very best guess is to find a land that the owner has great desire for selling, whether because of moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you are currently renting and thinking about using this approach perhaps the owner would be happy to assist you! There are a few variations that may be used depending upon you and your seller. Do they want the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The simplest way is to take over their mortgage repayments – 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 remains in the seller’s name.
You take over the first mortgage and make a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – two or three years. Instead of having the money sit in a bank they can be getting a high interest over 2 or 3 years with the rest due in full at the end of the term.
When the term ceases you should be able to refinance the cost, or you could sell. Unless you strike an actual bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely want to make a good investment. While your local bank may still be lacking confidence there are a lot of financial lenders that would like to make a deal. Financiers prefare real estate. The mortgage is usually around 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 do not care what kind of income you make. Conclude the deal with a second mortgage done with the seller. If you default they can eventually foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can see the whole picture. It is good that seller and buyer can work together. If they can’t wait for a sale, you can still give them their initial price with a little overall flexibility on their part.