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Are you contemplating investing in real estate? 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 best gamble is to find a property that the owner has great desire for selling, whether because they are moving, divorce, or frustration with the people renting the place.
Actually, if you maybe currently renting and considering using this strategy perhaps your landlord would be happy to assist you! There are a few variations that can be used depending upon you and your owner. Do they want 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 obligations – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to assume the mortgage. If you can’t get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make payments while the property stays in the seller’s name.
You take over the original mortgage and create a 2nd 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. Instead of having the money sit down in a bank they could be getting a high interest over 2 or 3 years with the remainder due in full at the end of the term.
When the term ceases you need to be able to refinance the cost, or perhaps you could sell. Unless you strike a genuine bad market the value of the property should have risen by then.
Most mortgage lenders merely need to make a great investment. While your local bank may still shy away there are plenty of financial lenders that would wish to make a deal. Financiers prefare real estate. The mortgage is mostly 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 do not care what kind of revenue you make. Complete the deal with a 2nd mortgage done with the seller. In case you default they could eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can see the whole picture. It is good that seller and buyer may work hand in hand. If they can’t wait for a sale, you may still give them their initial price with a little versatility on their part.