Hey Hey Real Estate Investors! We’ve published investing articles this year about everything from how to do your first deal, be more productive with your time and finances, finding and using Hard & Private Money, tips and tricks for using onlines investing tools, negotiation techniques, and more! Didn’t get a chance to read everything this […]…
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Are you thinking of investing in real estate? However, you do not have enough money 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 guess is to locate a property that the owner has great desire for selling, whether because of moving, a divorce settlement, or frustration with the people renting the place.
Actually, if you maybe currently renting and thinking of using this strategy perhaps your landlord would be happy to assist you! There are several variations that may be used depending upon you and your vendor. Do they want the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The simplest method is to take over their mortgage repayments – 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 obligations while the property remains in the seller’s name.
You take over the first mortgage and make a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – two or three years. Rather than having the money stay 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 ends you ought to be able to refinance the cost, or you can sell. Unless you hit a genuine bad market the value of the home should have risen by then.
A lot of mortgage lenders merely want to make a great investment. While your local bank may still be scared there are plenty of financial lenders that would wish to make a deal. Financiers prefare real estate. The mortgage is usually 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 estate if you default, they don’t care what sort of money you make. Complete the deal with a second mortgage created 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 whole picture. It is better that seller and buyer may work together. In the event they can’t wait for a sale, you can still give them their initial price with a little overall flexibility on their part.