Many years ago, I was asked to give a speech in Charleston, South Carolina, to an audience of extremely wealthy men who were nearing early retirement. At that point in… more
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Are you contemplating investing in property? But you do not have enough cash to do so. In this article is a tip you are able to 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 better guess is to locate a land that the owner has great desire for offering it, whether because they are moving, a divorce settlement, or frustration with tenants.
Actually, if you maybe currently renting and considering using this approach perhaps the owner would be glad to help you out! There are several variations that could be used depending on you and your vendor. Do they want the market price or are they just eager 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 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 stays in the seller’s name.
You take over the original mortgage and get 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 three years. Instead of having the money sit down 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 ends you ought to be able to refinance the cost, or perhaps you could sell. Unless you struck a real bad market the value of the property should have risen by then.
A lot of mortgage lenders merely need to make a good investment. While your local bank could still be scared there are a lot of financial lenders that would want to make a deal. Financiers prefare real estate. The mortgage is mostly based on 60-70% of the value of the property, so as long as they understand 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. In case you default they could eventually foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can see the complete picture. It is better that seller and buyer may work together. In the event they can’t wait for a sale, you can still give them their initial price with a little versatility on their part.