Photo by William Iven on Unsplash What are the 5 Apartment Hunting Secrets? Compared to risky and turbulent investments like penny stocks, investing in real estate is one of the more stable options. Of course, there’s risk involved no matter what you put your money into. But real estate tends to be a […]
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Are you thinking of investing in real estate? However, you don’t have enough cash to do this. Here is a tip you can use as long as the person selling the property is willing to negotiate along.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your best gamble is to find a land that the owner has great desire for offering it, whether because of moving, divorce, or frustration with tenants.
Actually, if you are currently renting and thinking of using this technique perhaps your landlord would be glad to help you out! There are a few variations that could be used depending upon you and your owner. Do they need the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The easiest way is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need 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 remains in the seller’s name.
You take over the original 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 – 2 or 3 years. Rather than having the money sit down in a bank they could be getting a high interest over 2 or 3 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 perhaps you can sell. Unless you struck a real bad market the value of the property should have risen by then.
Most mortgage lenders merely need to make a good investment. While your local bank may still be scared there are a lot of financial lenders that would wish 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 do not care what sort of money you make. Conclude the deal with a second mortgage done with the seller. In case you default they could eventually foreclose on the property and sell it, paying down 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 can still give them their asking price with a little overall flexibility on their part.