Property Investment – North West UK Expectations of 2018 in the property investment market vary depending on who you’re informed by. For some, the uncertainty of Brexit and the increase of tax burdens for landlords don’t bode well. But for others, 2018 is the year that those who are serious about investing in rental properties […]…
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Are you thinking of investing in property? However you don’t have enough money to accomplish this. Here is a tip you may 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 guess is to find a land that the owner has great desire for selling, whether because of moving, a divorce settlement, or frustration 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 upon you and your seller. Do they desire the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The simplest way is to consider taking over their mortgage obligations – 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 could as well try a ‘subject to’ assumption where you merely make obligations while the property stays in the seller’s name.
You take over the first mortgage and make a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – two or three years. Rather than having the money sit down in a bank they could be getting 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 you can sell. Unless you hit an actual bad market the value of the house 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 plenty of financial lenders that would wish to make a deal. Financiers prefare real estate. The mortgage is mostly around 60-70% of the value of the property, 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 sort of money you make. Conclude the deal with a second mortgage created with the seller. In case you default they could still foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can see the entire picture. It is better that seller and buyer may work hand in hand. In the event they can’t wait for a sale, you could still give them their initial price with a little overall flexibility on their part.