Habits are a loop that we create by queues and positive rewards. Real estate investors know that if they find a deal, perform their due diligence (queues) they are rewarded… more
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Are you contemplating investing in real estate? However you don’t have enough money to accomplish 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 desire for offering it, whether because of moving, divorce, or frustration with the people renting the place.
Actually, if you are currently renting and considering using this approach perhaps the owner would be glad to help you out! There are a few variations that could be used depending upon you and your seller. Do they want the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The easiest way 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 could also try a ‘subject to’ assumption where you merely make obligations while the property remains in the seller’s name.
You take over the first mortgage and get a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – 2 or three years. Rather than having the money sit down in a bank they could be collecting a high interest over two or three years with the rest due in full at the end of the term.
When the term ceases you need to be able to refinance the cost, or you can sell. Unless you struck a real bad market the value of the house should have risen in that time.
Most mortgage lenders merely want to make a great investment. While your local bank may still be scared there are plenty of financial lenders that would want to make a deal. Financiers like property investing. The mortgage is usually based on 60-70% of the value of the property, 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 kind of revenue you make. Conclude the deal with a 2nd mortgage created with the seller. In case you default they could still foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can observe the complete picture. It is good that seller and buyer can work together. If they can’t wait for a sale, you may still give them their initial price with a little versatility on their part.