In the wake of new regulation and rise of real estate crowdfunding platforms, there’s been significant growth in private real estate syndications where operators pool capital from a group of high-net-worth investors to acquire a property and execute a specific …
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Are you thinking of investing in real estate? However you do not 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 interested (or even understand) the concept outlined. Your better gamble is to find a land that the owner has great interest in selling, whether because of moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you maybe currently renting and considering using this approach perhaps the owner would be glad to assist you! There are several variations that could be used depending on you and your seller. Do they want the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The simplest method is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the original lender to assume the mortgage. If you can’t get approved for an assumable mortgage you could also 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 period – 2 or three years. Instead of having the money sit in a bank they can be getting 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 need to be able to refinance the cost, or else you could sell. Unless you hit a genuine bad market the value of the home should have risen by then.
Most mortgage lenders merely want to make a great investment. While your local bank could still shy away there are a lot of financial lenders that would want to make a deal. Financiers prefare property investing. The mortgage is mostly around 60-70% of the value of the land, so as long as they know they get their money back in the value of the property if you default, they don’t care what kind of money you make. Conclude the deal with a 2nd mortgage done with the seller. If you default they could still foreclose on the property and sell it, settling 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 that they can’t wait for a sale, you can still give them their initial price with a little versatility on their part.