While most Americans state they believe owning a home is part of the American Dream, only about eight percent of the population reports having the basic knowledge to figure out… more
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Are you thinking of investing in real estate? However you don’t have enough cash to do this. Here is a tip you may use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your very best wager is to locate a land that the owner has great interest in offering it, whether because they are moving, a divorce settlement, or they are frustrated with tenants.
Actually, if you are currently renting and considering using this technique perhaps your landlord would be happy to help you out! There are a few variations that could be used depending upon you and your seller. Do they want the market price or are they just desperate to get out from the monthly payments – maybe 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 cannot get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the original mortgage and make a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – 2 or three years. Instead of having the money sit down in a bank they could be collecting a high interest over 2 or 3 years with the rest 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 strike a genuine bad market the value of the property should have risen in that time.
Most mortgage lenders merely need to make a good investment. While your local bank could still be scared there are a lot of financial lenders that would want to make a deal. Financiers prefare property investing. 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 don’t care what kind of income you make. Complete the deal with a 2nd mortgage done with the seller. In case you default they can eventually foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can see the whole 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 versatility on their part.