“Most financial advisors will tell you that you simply cannot have a better lifestyle in retirement than you did while you were working full time. Most financial advisors are wrong.”… more
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Are you thinking of investing in real estate? However, you don’t have enough cash to do this. Right here 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 willing (or even understand) the concept outlined. Your best wager is to find a property that the owner has great interest in offering it, whether because of moving, divorce, or frustration with the people renting the place.
Actually, if you are currently renting and considering using this technique perhaps the owner would be happy to assist you! There are a few variations that can be used depending on you and your owner. Do they desire the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The simplest way is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to presume the mortgage. If you can’t get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make obligations while the property stays in the seller’s name.
You take over the first 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 period – two or three years. Instead of having the money sit down in a bank they can be getting a high interest over two or three years with the remainder due in full at the end of the term.
When the term ends you should be able to refinance the cost, or you could sell. Unless you hit a real bad market the value of the home should have risen by then.
A lot of mortgage lenders merely need to make a good investment. While your local bank may still be lacking confidence there are a lot of financial lenders that would want to make a deal. Financiers like real estate. The mortgage is usually 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 kind of money you make. Complete the deal with a second mortgage created with the seller. In case you default they can eventually foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the entire picture. It is good that seller and buyer can work hand in hand. In the event they can’t wait for a sale, you may still give them their initial price with a little versatility on their part.