Although rental rate growth slowed over the course of 2017, Zillow reported at the start of 2018 that rates were starting to rise again. Over the past 12 months, median… more
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Are you thinking of investing in real estate? However you don’t have enough cash 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 all sellers will be willing (or even understand) the concept outlined. Your better gamble is to find a property that the owner has great interest in offering it, whether because they are moving, a divorce settlement, or frustration with tenants.
Actually, if you maybe currently renting and thinking of using this approach perhaps the owner would be happy to assist you! There are several variations that can be used depending on you and your seller. Do they desire the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The easiest way is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the first 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 payments while the property stays in the seller’s name.
You take over the original 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 – 2 or three years. Instead of 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 draws to a close you need to 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.
Most mortgage lenders merely want to make a great investment. While your local bank may still shy away there are a lot of financial lenders that would like to make a deal. Financiers like property investing. The mortgage is mostly around 60-70% of the value of the land, so as long as they know they get their money back in the value of the estate if you default, they do not care what kind of income you make. Conclude the deal with a second mortgage created with the seller. If you default they can eventually foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see the complete picture. It is good that seller and buyer may work together. In the event they can’t wait for a sale, you can still give them their asking price with a little overall flexibility on their part.