You’ve probably heard the old saying, “Real estate is all about three things: location, location, location.” I think we should throw that one right out the window because is entirely … more
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Are you contemplating investing in real estate? But you do not have enough cash to do so. 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 better wager is to find a land that the owner has great interest in selling, whether because they are moving, a divorce settlement, or frustration with the people renting the place.
Actually, if you are currently renting and thinking of using this approach perhaps your landlord would be happy to help you out! There are a few variations that can be used depending upon you and your owner. Do they need the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The easiest method is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the first lender to presume the mortgage. If you can’t 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 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. Instead of having the money sit down 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 draws to a close you should be able to refinance the cost, or you could sell. Unless you struck 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 could still be scared there are lots of financial lenders that would like to make a deal. Financiers like real estate. The mortgage is mostly around 60-70% of the value of the land, so as long as they know they get their money back in the value of the estate if you default, they do not care what sort of money you make. Conclude the deal with a second mortgage created with the seller. In case you default they could still foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can observe the whole picture. It is good that seller and buyer may work together. In the event that they can’t wait for a sale, you can still give them their asking price with a little overall flexibility on their part.