Creating a business name is one of the most exciting and important startup tasks that entrepreneurs must tackle. The name you choose for your business will serve to distinguish you from your competitors and give customers insight into the experience they will have with your company. You will want to get it right and follow […]…
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Are you contemplating investing in real estate? However, you do not have enough cash to do so. Here is a tip you can use as long as the person selling the property is willing to negotiate with you.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your better gamble is to locate a land that the owner has great desire for offering it, whether because they are moving, divorce, or frustration with the folks renting the property.
Actually, if you are currently renting and thinking about using this approach perhaps your landlord would be happy to assist you! There are several variations that can be used depending on you and your owner. Do they desire the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The simplest method 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 cannot get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the first 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. Instead of having the money stay in a bank they can be getting a high interest over two or three 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 could sell. Unless you strike an actual bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely want to make a good investment. While your local bank may still be lacking confidence there are lots of financial lenders that would wish to make a deal. Financiers like real estate. The mortgage is usually around 60-70% of the value of the property, 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 revenue you make. Complete the deal with a 2nd mortgage created with the seller. If you default they could eventually foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can observe the whole 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 asking price with a little versatility on their part.