You might expect the National Association of Home Builders (NAHB) to be happy to hear about inventory shortages since that means there is a need for more new construction. But… more
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Are you contemplating investing in real estate? However, you do not have enough money to do this. 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 guess is to locate a property that the owner has great interest in offering it, whether because they are moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you maybe currently renting and thinking of using this approach perhaps your landlord would be happy to help you out! There are some variations that can be used depending on you and your owner. Do they need the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The easiest method is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume the mortgage. If you can’t get approved for an assumable mortgage you may as well 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 make a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – 2 or 3 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 draws to a close you need to be able to refinance the cost, or else you could sell. Unless you hit an actual bad market the value of the property should have risen by then.
Most mortgage lenders merely want to make a good investment. While your local bank could still shy away there are lots of financial lenders that would like to make a deal. Financiers like real estate. The mortgage is mostly around 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 do not care what sort of revenue you make. Conclude the deal with a 2nd mortgage created with the seller. In case you default they could eventually foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can observe the whole picture. It is better 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.