Basic Instincts When your instincts – or intuition, as some like to call it – kick in, you need to pay attention. Following your instincts or intuitions isn’t always easy. We keep our eyes on the prize, and most of us will stop at nothing (within legal and ethical limits, of course) to close a deal. But, […]…
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Are you thinking of investing in real estate? However, you do not have enough cash to accomplish this. In this article is a tip you can 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 wager is to locate a land that the owner has great desire for selling, whether because of moving, divorce, or they are frustrated with the people renting the place.
Actually, if you are currently renting and thinking about using this strategy perhaps the owner would be happy to help you out! There are several variations that could be used depending upon you and your vendor. Do they desire the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage repayments – 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 also try a ‘subject to’ assumption where you merely make obligations while the property remains in the seller’s name.
You take over the first mortgage and make 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 3 years. Instead of having the money sit in a bank they can be getting a high interest over 2 or 3 years with the remainder 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 else you could sell. Unless you strike an actual bad market the value of the property should have risen in that time.
A lot of mortgage lenders merely want to make a good investment. While your local bank could still be scared there are a lot of financial lenders that would like to make a deal. Financiers prefare property investing. The mortgage is mostly around 60-70% of the value of the property, so as long as they understand they get their money back in the value of the property 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 observe the entire picture. It is better that seller and buyer can work together. In the event that they can’t wait for a sale, you could still give them their initial price with a little overall flexibility on their part.