Last year, New York University (NYU) marketing professor Scott Galloway predicted that Amazon would purchase Whole Foods. In June 2017, the internet behemoth did so. Now, Galloway has another big,… more
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Are you thinking of investing in real estate? But you do not have enough cash to do so. In this article is a tip you can 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 find a land that the owner has great interest in selling, whether because they are moving, divorce, or they are frustrated with the people renting the place.
Actually, if you are currently renting and thinking of using this approach perhaps your landlord would be glad to assist you! There are some variations that could be used depending upon you and your vendor. Do they want the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the first lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make payments while the property stays in the seller’s name.
You take over the original 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 – two or 3 years. Instead of having the money stay in a bank they could be collecting a high interest over two or three years with the remainder due in full at the end of the term.
When the term ceases you need to be able to refinance the cost, or perhaps you could sell. Unless you strike a genuine bad market the value of the house should have risen in that time.
Most mortgage lenders merely need to make a great investment. While your local bank may still shy away there are plenty of financial lenders that would want to make a deal. Financiers like real estate. The mortgage is usually 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 don’t care what sort of revenue you make. Conclude the deal with a 2nd mortgage done with the seller. In case you default they can eventually foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see the entire picture. It is better that seller and buyer can work together. If they can’t wait for a sale, you may still give them their asking price with a little versatility on their part.