Ask a real estate investor why they left their “9-to-5,” and they’ll usually say something about having more time. Investors are, in many cases, parents and grandparents seeking more time… more
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Are you contemplating investing in property? However you do not have enough cash to do this. In this article is a tip you can use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your best wager is to locate a property that the owner has great interest in selling, whether because they are moving, divorce, or frustration with the folks renting the property.
Actually, if you maybe currently renting and thinking of using this technique perhaps your landlord would be happy to assist you! There are several variations that could be used depending on you and your vendor. Do they want the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The simplest method is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the first lender to presume the mortgage. If you cannot 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 create 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. Rather than having the money sit down in a bank they can 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 ends you ought to be able to refinance the cost, or you can sell. Unless you strike an actual bad market the value of the property should have risen by then.
A lot of mortgage lenders merely want to make a great investment. While your local bank may still be lacking confidence there are a lot of financial lenders that would want to make a deal. Financiers like 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 land if you default, they don’t care what sort of income you make. Conclude the deal with a 2nd mortgage created with the seller. If you default they can still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can observe the complete 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 may still give them their initial price with a little versatility on their part.