Not so long ago, selling a property during the holidays was to be avoided at all costs. Who wants to look at houses when everyone is busy with parties and… more
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Are you contemplating investing in real estate? However you don’t have enough cash to do this. Here is a tip you may use as long as the property seller is willing to negotiate with you.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your best wager is to find a property that the owner has great interest in offering it, whether because they are moving, divorce, or frustration with the folks renting the property.
Actually, if you maybe currently renting and thinking of using this strategy perhaps the owner would be glad to help you out! There are a few variations that can be used depending upon you and your vendor. Do they desire the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The simplest method is to consider taking over their mortgage payments – 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 as well try a ‘subject to’ assumption where you merely make payments while the property stays in the seller’s name.
You take over the first mortgage and create a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – 2 or three years. Rather than 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 investment term.
When the term draws to a close you need to be able to refinance the cost, or else you can sell. Unless you struck an actual bad market the value of the home should have risen by then.
A lot of mortgage lenders merely want to make a good investment. While your local bank may still shy away there are lots of financial lenders that would want 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 know they get their money back in the value of the land if you default, they don’t 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, settling the existing mortgage with the proceeds.
Now you can see 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 initial price with a little versatility on their part.