One of my favorite analogies for business was given by Jim Collins in his book Great by Choice. It involves Roald Amundsen, who was the first explorer to ever reach… more
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Are you contemplating investing in real estate? But you do not have enough cash to do so. Right here is a tip you may 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 very best gamble is to locate a land that the owner has great interest in offering it, whether because of moving, divorce, or they are frustrated with the folks renting the property.
Actually, if you maybe currently renting and thinking about using this strategy perhaps your landlord would be glad to help you out! There are several variations that may be used depending on you and your seller. Do they want the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The easiest method is to consider taking over their mortgage obligations – 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 could also try a ‘subject to’ assumption where you merely make payments while the property remains in the seller’s name.
You take over the original mortgage and get a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – two or three years. Rather than having the money sit 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 ceases you should be able to refinance the cost, or perhaps you can sell. Unless you hit a genuine bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely need to make a great investment. While your local bank could still be lacking confidence there are a lot of financial lenders that would like to make a deal. Financiers like property investing. The mortgage is mostly based on 60-70% of the value of the land, so as long as they understand they get their money back in the value of the estate if you default, they don’t care what kind of income you make. Complete the deal with a 2nd mortgage done with the seller. If 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 may work together. In the event they can’t wait for a sale, you may still give them their asking price with a little overall flexibility on their part.