Despite being in possession of a five-year lease on prime retail real estate in Manhattan’s premier retail corridor, Nike recently announced that it would relocate its Niketown store five blocks… more
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Are you thinking of investing in real estate? However, you don’t have enough money to do this. Here is a tip you may use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your very best gamble is to locate a land that the owner has great desire for selling, whether because of moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you are currently renting and considering using this approach perhaps the owner would be happy to assist you! There are some variations that can be used depending on you and your vendor. Do they want the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The easiest method is to take over their mortgage repayments – 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 remains in the seller’s name.
You take over the first mortgage and create 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 3 years. Instead of having the money stay in a bank they could be getting 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 should be able to refinance the cost, or else you could sell. Unless you hit an actual bad market the value of the home should have risen in that time.
A lot of mortgage lenders merely need to make a great investment. While your local bank could still be scared there are a lot of financial lenders that would wish 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 property if you default, they don’t care what sort of income you make. Complete the deal with a 2nd mortgage done with the seller. In case you default they could eventually foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can observe the complete picture. It is better that seller and buyer can work together. In the event that they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.