The NASCAR racing season wrapped up in Miami, Florida, this past November. We have just two short months full of holiday merriment and planning before we are back on track… more
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Are you contemplating investing in real estate? But you do not have enough cash to do so. Here is a tip you are able to use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your better guess is to locate a land that the owner has great interest in selling, whether because they are moving, divorce, or frustration with tenants.
Actually, if you are currently renting and thinking about using this technique perhaps your landlord would be glad to help you out! There are some variations that may be used depending upon you and your seller. Do they desire the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The simplest method is to take over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the initial 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 original mortgage and make a second mortgage on the remaining cost of the property 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 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 ceases you ought to be able to refinance the cost, or perhaps you could sell. Unless you hit an actual bad market the value of the house should have risen in that time.
Most mortgage lenders merely want to make a good investment. While your local bank could still shy away there are a lot of financial lenders that would like to make a deal. Financiers like property investing. The mortgage is usually around 60-70% of the value of the land, 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 kind of income you make. Complete the deal with a second mortgage created with the seller. In case you default they could still foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can see the complete picture. It is good that seller and buyer can work together. In the event that they can’t wait for a sale, you may still give them their asking price with a little versatility on their part.