The state of Texas has 10 distinct climatic regions and 11 distinct ecological regions, so it’s hardly surprising that the second-largest state in the union boasts hundreds of distinct housing… more
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Are you thinking of investing in real estate? However, you don’t have enough cash 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 all sellers will be willing (or even understand) the concept outlined. Your better wager is to find a land that the owner has great desire for selling, whether because they are moving, divorce, or they are frustrated with tenants.
Actually, if you are currently renting and considering using this strategy perhaps the owner would be glad to help you out! There are some variations that may 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 – maybe facing foreclosure?
The simplest way is to take over their mortgage payments – 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 may as well try a ‘subject to’ assumption where you merely make obligations while the property remains in the seller’s name.
You take over the original mortgage and get a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – 2 or 3 years. Rather than having the money sit in a bank they could be collecting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term ends you need to be able to refinance the cost, or perhaps you can sell. Unless you struck a real 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 shy away there are lots of financial lenders that would want to make a deal. Financiers prefare property investing. The mortgage is usually based on 60-70% of the value of the land, 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 money you make. Conclude the deal with a 2nd mortgage created with the seller. In case you default they can eventually foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can see the whole picture. It is better that seller and buyer may work together. If they can’t wait for a sale, you could still give them their asking price with a little versatility on their part.