It’s a great time to grow our networks. Many of us have just committed to, or reaffirmed, our real estate investment goals for 2018. There’s no doubt that successful investing… more
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Are you contemplating investing in real estate? But you do not have enough money to accomplish this. Here is a tip you are able to use as long as the person selling the property is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your better gamble is to locate a property that the owner has great interest in selling, whether because they are moving, divorce, or they are frustrated with the people renting the place.
Actually, if you are currently renting and thinking about using this approach perhaps the owner would be glad to help you out! There are several variations that could be used depending on you and your owner. Do they need the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The simplest way is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the first lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the original 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 – 2 or 3 years. Rather than having the money stay 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 term.
When the term draws to a close you should be able to refinance the cost, or perhaps you can sell. Unless you struck 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 could still shy away there are lots of financial lenders that would wish to make a deal. Financiers like real estate. The mortgage is usually based on 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 done with the seller. If you default they could eventually foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the complete picture. It is better that seller and buyer may work hand in hand. In the event that they can’t wait for a sale, you can still give them their asking price with a little versatility on their part.