Today’s article is on both the obvious and not so obvious landlord liabilities. If you’re going to invest in rental properties, you need to be aware of potential landlord liabilities. Some hazards are more obvious than others. We will start with the obvious and work our way to the lesser known pitfalls that can […]
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Are you contemplating investing in property? However, you don’t have enough cash to do so. Here is a tip you may use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your best wager is to find a land that the owner has great interest in selling, whether because of moving, a divorce settlement, or frustration with the people renting the place.
Actually, if you maybe currently renting and considering using this approach perhaps your landlord would be glad to help you out! There are some variations that can be used depending on you and your seller. Do they want the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The easiest method is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the first lender to assume the mortgage. If you can’t get approved for an assumable mortgage you may also 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 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. Instead of having the money sit down 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 term.
When the term ceases you ought to 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.
A lot of mortgage lenders merely want to make a great investment. While your local bank could still be scared there are plenty of financial lenders that would wish 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 property if you default, they don’t care what sort of money you make. Complete the deal with a 2nd mortgage created with the seller. In case you default they can still foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the complete picture. It is good that seller and buyer can work hand in hand. If they can’t wait for a sale, you could still give them their initial price with a little versatility on their part.