When the Center for Economics and Business Research (CEBR) announced in early January that China’s economy would surpass that of the United States “by 2032,” the reaction from the U.S.… more
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Are you thinking of investing in real estate? However, you don’t have enough money to do so. 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 willing (or even understand) the concept outlined. Your better wager is to find a land that the owner has great desire for selling, whether because they are moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you maybe currently renting and thinking about using this technique perhaps the owner would be happy to assist you! There are a few variations that may be used depending on you and your seller. Do they want the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The easiest method is to take over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the original lender to assume the mortgage. If you cannot get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make repayments while the property stays in the seller’s name.
You take over the first mortgage and create a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – two or 3 years. Rather than having the money sit down in a bank they could be getting a high interest over 2 or 3 years with the remainder due in full at the end of the investment term.
When the term ceases you should be able to refinance the cost, or else you could sell. Unless you hit a real bad market the value of the home should have risen in that time.
Most mortgage lenders merely need to make a good investment. While your local bank may still be lacking confidence there are plenty of financial lenders that would want 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 understand they get their money back in the value of the property if you default, they don’t care what kind of money you make. Complete the deal with a second mortgage created with the seller. If you default they can eventually foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can observe the complete picture. It is better that seller and buyer can work together. In the event they can’t wait for a sale, you may still give them their initial price with a little versatility on their part.