I’ve been hunting bargain properties for decades. Just like everything else in life, the process has evolved. In a lot of cases, what used to work doesn’t work anymore, and… more
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Are you contemplating investing in real estate? However, you do not have enough money to do this. Right here is a tip you can use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your better guess is to find a property that the owner has great desire for selling, whether because of moving, divorce, or frustration with the people renting the place.
Actually, if you maybe currently renting and thinking of using this technique perhaps your landlord would be happy to help you out! There are several variations that may be used depending on you and your seller. Do they need the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The simplest way is to take over their mortgage payments – 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 may also try a ‘subject to’ assumption where you merely make obligations while the property remains in the seller’s name.
You take over the original 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 period – 2 or 3 years. Instead of having the money sit down in a bank they can be collecting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term ends you ought to be able to refinance the cost, or else you can sell. Unless you struck a genuine bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely want to make a great investment. While your local bank could still be scared there are a lot of financial lenders that would like to make a deal. Financiers like real estate. 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 estate if you default, they don’t care what sort of money you make. Complete the deal with a 2nd mortgage created with the seller. In case you default they can still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the complete picture. It is good that seller and buyer can work together. 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.