It is the age-old question every landlord must face: Should you manage yourself or hire a property manager? It’s not an easy question to answer and it depends on all… more
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Are you thinking of investing in property? However you do not have enough cash to accomplish this. In this article is a tip you are able to use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your best guess is to locate a property that the owner has great desire for offering it, whether because of moving, a divorce settlement, or frustration with tenants.
Actually, if you are currently renting and thinking about using this technique perhaps your landlord would be glad to help you out! There are some variations that could be used depending on you and your owner. Do they want the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The easiest way is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will have 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 payments while the property stays in the seller’s name.
You take over the original mortgage and make a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – 2 or three years. Rather than having the money sit down in a bank they can 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 need to be able to refinance the cost, or else you can sell. Unless you hit a genuine bad market the value of the property should have risen by then.
Most mortgage lenders merely want to make a good 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 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 land if you default, they do not care what sort of revenue you make. Complete the deal with a 2nd mortgage done with the seller. In case you default they could eventually foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can observe the whole picture. It is good that seller and buyer may work together. In the event they can’t wait for a sale, you could still give them their asking price with a little versatility on their part.