In every business sector, there are individuals and groups who affect the conversation about their industry in meaningful ways. Some, like Howard Hughes, the reclusive billionaire who is credited with… more
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Are you thinking of investing in property? But you don’t have enough cash to do this. Here is a tip you are able to use as long as the property seller is willing to negotiate along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your very best wager is to find a land that the owner has great interest in offering it, whether because of moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you are currently renting and thinking of using this strategy perhaps the owner would be happy to assist you! There are a few variations that can be used depending upon you and your owner. Do they need the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The simplest way is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume the mortgage. If you can’t get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make payments 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 three years. Instead of having the money stay in a bank they can be getting 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 you can sell. Unless you struck a real bad market the value of the home should have risen by then.
Most mortgage lenders merely need to make a good investment. While your local bank may still be lacking confidence there are plenty of financial lenders that would want to make a deal. Financiers prefare real estate. 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 land if you default, they don’t care what sort of money you make. Conclude the deal with a 2nd mortgage created with the seller. If you default they can eventually foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see the whole picture. It is good that seller and buyer may work together. In the event they can’t wait for a sale, you can still give them their asking price with a little overall flexibility on their part.