When Black Knight, Inc., released its most recent Home Price Index (HPI) Report, analysts immediately noted that 12 of the 40 largest U.S. metros hit new highs in home values… more
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Are you thinking of investing in property? However you don’t have enough money to do so. Here is a tip you may use as long as the person selling the property is willing to negotiate with you.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your best guess is to locate a property that the owner has great desire for offering it, whether because of moving, divorce, or frustration with the people renting the place.
Actually, if you are currently renting and thinking of using this technique perhaps your landlord would be happy to help you out! There are a few variations that can be used depending upon you and your seller. Do they desire the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The simplest way is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the original lender to presume 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 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 2 or 3 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 else you could sell. Unless you strike a genuine bad market the value of the house should have risen by then.
A lot of mortgage lenders merely need to make a good investment. While your local bank could still be lacking confidence 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 land, 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 sort of money you make. Conclude the deal with a 2nd mortgage done with the seller. If you default they can eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can see the entire picture. It is good that seller and buyer can work together. In the event that they can’t wait for a sale, you can still give them their initial price with a little overall flexibility on their part.