According to a panel of six premier experts in the single-family rental (SFR) industry, 2018 is going to be a good year for SFR. Although, as always, the local market… more
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Are you thinking of investing in real estate? But you do not have enough cash to accomplish this. Here is a tip you may use as long as the property seller 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 locate a property that the owner has great interest in selling, whether because of moving, divorce, or they are frustrated with the people renting the place.
Actually, if you are currently renting and thinking of using this approach perhaps the owner would be glad to assist you! There are several variations that could be used depending on you and your seller. Do they want the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The simplest way is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the first lender to assume the mortgage. If you cannot 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 original mortgage and make a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – two or three years. Instead of having the money sit in a bank they could be collecting a high interest over 2 or 3 years with the remainder due in full at the end of the term.
When the term ceases you ought to be able to refinance the cost, or else you can sell. Unless you strike a genuine 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 may still shy away there are lots of financial lenders that would want to make a deal. Financiers like property investing. The mortgage is mostly 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 sort of money you make. Conclude the deal with a second mortgage created with the seller. If you default they can still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the whole picture. It is better 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.