Although home prices have been rising briskly in many markets across the country, the prospects for investors in these markets can be quite different from market to market. This is… more
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Are you thinking of investing in property? But you do not have enough cash to do this. In this article is a tip you are able to use as long as the person selling the property is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your better gamble is to locate a land that the owner has great desire for selling, whether because they are moving, divorce, or they are frustrated with the people renting the place.
Actually, if you are currently renting and thinking about using this approach perhaps your landlord would be glad to help you out! There are several variations that can be used depending on you and your seller. Do they need the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The simplest method is to take over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the original 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 payments while the property stays in the seller’s name.
You take over the first mortgage and get a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – 2 or 3 years. Rather than having the money sit down in a bank they can be collecting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term draws to a close you should be able to refinance the cost, or perhaps you could sell. Unless you hit a genuine bad market the value of the house should have risen by then.
A lot of mortgage lenders merely need to make a good investment. While your local bank may still be lacking confidence there are lots of financial lenders that would want to make a deal. Financiers prefare property investing. 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 land if you default, they don’t care what sort of revenue you make. Conclude the deal with a second mortgage created with the seller. In case you default they could still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can observe the entire picture. It is better that seller and buyer can work together. In the event they can’t wait for a sale, you could still give them their initial price with a little overall flexibility on their part.