A real estate brokerage expanding into the Seattle, Washington, market got a lot of attention recently with a marketing campaign that may have misfired. The company installed about 1,500 small,… 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 may use as long as the property seller is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your best gamble is to locate a land that the owner has great interest in selling, whether because they are moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you maybe currently renting and thinking about using this technique perhaps your landlord would be glad to help you out! There are several variations that can be used depending upon you and your vendor. Do they want the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The simplest way is to take over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the original 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 obligations while the property stays in the seller’s name.
You take over the first 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 three years. Rather than having the money sit in a bank they could be getting a high interest over two or three years with the remainder due in full at the end of the investment term.
When the term ceases you ought to be able to refinance the cost, or else you can sell. Unless you hit a genuine bad market the value of the property should have risen by then.
Most 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 understand they get their money back in the value of the property if you default, they don’t care what kind 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, paying off the existing mortgage in the proceeds.
Now you can see the whole picture. It is good that seller and buyer can work hand in hand. If they can’t wait for a sale, you may still give them their asking price with a little overall flexibility on their part.