Real estate marketing is a tough industry. Competition is high and face to face meetings are becoming rare. The internet changed the face of the market when it came to… more
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Are you thinking of investing in real estate? However, you don’t have enough cash to accomplish this. 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 every seller will be interested (or even understand) the concept outlined. Your better guess is to locate a land that the owner has great interest in offering it, whether because of moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you are currently renting and considering using this strategy perhaps your landlord would be happy to help you out! There are several variations that can be used depending upon you and your owner. Do they want the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The simplest way is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume 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 remains in the seller’s name.
You take over the first mortgage and get 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 3 years. Instead of having the money stay in a bank they can be getting a high interest over two or three years with the remainder due in full at the end of the investment term.
When the term ends you should be able to refinance the cost, or you can sell. Unless you strike a genuine bad market the value of the house should have risen in that time.
Most mortgage lenders merely want to make a good investment. While your local bank could still be scared there are plenty of financial lenders that would like to make a deal. Financiers prefare real estate. 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 do not care what kind of revenue you make. Complete the deal with a 2nd mortgage created with the seller. In case you default they could eventually foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can observe the whole picture. It is good that seller and buyer may work hand in hand. In the event they can’t wait for a sale, you may still give them their asking price with a little overall flexibility on their part.