Late last week, the U.S. Senate passed a sweeping federal tax reform bill that has been highly controversial and was approved wholly along party lines, with all but one republican… more
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Are you thinking of investing in real estate? However you don’t have enough money 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 guess is to locate a land that the owner has great desire for selling, whether because they are moving, divorce, or frustration with the folks renting the property.
Actually, if you are currently renting and considering using this approach perhaps the owner would be glad to help you out! There are a few variations that could be used depending upon you and your owner. Do they need the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The easiest method is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the first 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 repayments while the property stays in the seller’s name.
You take over the original mortgage and create a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – two or 3 years. Rather than having the money sit in a bank they can be collecting a high interest over 2 or 3 years with the rest due in full at the end of the investment term.
When the term ends you need to be able to refinance the cost, or perhaps you can sell. Unless you strike a genuine bad market the value of the house should have risen by then.
Most mortgage lenders merely want to make a good investment. While your local bank could still be scared there are a lot of financial lenders that would like to make a deal. Financiers prefare property investing. The mortgage is mostly 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 don’t care what kind of revenue you make. Conclude the deal with a second mortgage created with the seller. If you default they can eventually foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can observe the complete picture. It is better that seller and buyer may work together. In the event that they can’t wait for a sale, you could still give them their initial price with a little versatility on their part.