According to CoreLogic’s recently published Home Equity Report, borrowing money to buy a home is paying off for homeowners these days. In 2017, homeowners with mortgages gained more than $15,000 in home equity, the highest growth in home equity in four years. That equates to a cumulative equity in mortgaged real estate of $908 billion, CoreLogic researchers observed.
Rising equity is not just good for individual homeowners. It is also a good thing for real estate investors who own p…
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Are you contemplating investing in real estate? However, you do not have enough money to do so. Here 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 gamble is to find a land that the owner has great interest in selling, whether because they are moving, divorce, or they are frustrated with the people renting the place.
Actually, if you are currently renting and thinking about using this strategy perhaps the owner would be happy to assist you! There are some variations that can be used depending on you and your owner. Do they want the market price or are they just desperate to get out of 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 initial lender to presume the mortgage. If you can’t get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make payments while the property remains 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 period – 2 or three years. Rather than having the money sit in a bank they can be collecting a high interest over two or three years with the rest due in full at the end of the term.
When the term draws to a close 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 in that time.
A lot of mortgage lenders merely want to make a good investment. While your local bank may still shy away there are plenty of financial lenders that would like to make a deal. Financiers prefare property investing. The mortgage is usually 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 estate if you default, they do not care what kind of revenue you make. Complete the deal with a 2nd mortgage done with the seller. In case you default they can still foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the whole picture. It is good that seller and buyer can work hand in hand. 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.