Owning real estate is a great investment, as any agent will tell you. Terms like “appreciating asset” and “equity” can convert almost any potential buyer to a homeowner. However, the… more
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Are you contemplating investing in property? But you do not have enough cash to accomplish this. In this article is a tip you can use as long as the property seller is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your best gamble is to locate a property that the owner has great interest in selling, whether because they are moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you are currently renting and thinking about using this approach perhaps the owner would be glad to help you out! There are several variations that could be used depending upon you and your owner. 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 take over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to assume the mortgage. If you cannot get approved for an assumable mortgage you could also 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 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – two or three years. Instead of having the money sit down in a bank they could be getting a high interest over 2 or 3 years with the remainder due in full at the end of the term.
When the term ends you ought to be able to refinance the cost, or you can sell. Unless you struck a genuine bad market the value of the home should have risen by then.
Most mortgage lenders merely want to make a good investment. While your local bank may still be lacking confidence there are lots of financial lenders that would like 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 estate if you default, they do not care what kind 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 could still give them their asking price with a little versatility on their part.