I’m fully aware that this site and those who visit the site frequently are doing so because of real estate investing. Cool! However, it is the small things that add up and kill our bottom line as Landlords. So in this article I’m really talking about my water bill, loss of monthly cash flow profits and […]…
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Are you contemplating investing in property? However you do not have enough money to do so. Here is a tip you may 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 better gamble is to locate a land that the owner has great desire for offering it, whether because of moving, divorce, or they are frustrated with the people renting the place.
Actually, if you are currently renting and considering using this strategy perhaps the owner would be happy to assist you! There are a few variations that can be used depending on you and your vendor. Do they desire the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The easiest method is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the first lender to assume the mortgage. If you can’t get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make repayments while the property stays in the seller’s name.
You take over the first mortgage and create 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. Rather than having the money sit in a bank they could be collecting a high interest over 2 or 3 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 you can 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 need to make a good investment. While your local bank could still be lacking confidence there are a lot of financial lenders that would wish 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 know they get their money back in the value of the estate if you default, they do not care what sort of revenue you make. Conclude the deal with a second mortgage created with the seller. If you default they can still foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can observe the complete picture. It is good that seller and buyer may work hand in hand. In the event they can’t wait for a sale, you could still give them their asking price with a little overall flexibility on their part.