Traditionally, those that have purchased investment real estate have done very well with their investments when rented out for cashflow. While property values and rental rates continue to rise, there are now other ways to make money with your property. One great option to consider would be to use your investment property and rent it out on […]…
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Are you contemplating investing in property? But you do not have enough cash to accomplish this. In this article is a tip you may use as long as the person selling the property is willing to negotiate along.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your very best guess is to find a land that the owner has great desire for offering it, whether because of moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you are currently renting and thinking about using this technique perhaps the owner would be glad to help you out! There are some variations that could be used depending upon you and your seller. Do they want the market price or are they just desperate to get out from 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 original lender to presume the mortgage. If you cannot get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the original 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 frame – 2 or 3 years. Rather than having the money stay in a bank they can be collecting a high interest over two or three years with the remainder due in full at the end of the investment term.
When the term ceases you ought to be able to refinance the cost, or else you could sell. Unless you hit a genuine bad market the value of the property should have risen by then.
Most mortgage lenders merely need to make a good investment. While your local bank may still shy away there are lots of financial lenders that would like to make a deal. Financiers like property investing. The mortgage is mostly based on 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 income you make. Conclude the deal with a second mortgage created with the seller. In case you default they can eventually foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see the entire picture. It is good that seller and buyer can work together. In the event they can’t wait for a sale, you may still give them their asking price with a little overall flexibility on their part.