Most areas of the United States have dealt with some pretty severe cold weather in the past couple of months. Depending on where you live, you may have heard the polar chill referred to as the Polar Vortex, the Bomb Cyclone, or “Snowpocalypse 2018.” In Chicago, we refer to our city during winter months as “Chiberia.” Catchy huh?
If you have properties in the Chicago area, I am certain you, like me and my real estate business, have gotten more than your fair share of “no heat/…
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Are you contemplating investing in real estate? But you do not have enough money to accomplish this. In this article is a tip you can use as long as the person selling the property is willing to negotiate with you.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your better wager is to find a property that the owner has great desire for selling, whether because they are moving, divorce, or they are frustrated with tenants.
Actually, if you are currently renting and thinking about using this approach perhaps your landlord would be glad to assist you! There are some 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 of the monthly payments – maybe facing foreclosure?
The easiest method is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the first lender to assume 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 stays in the seller’s name.
You take over the first mortgage and make a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – two or three years. Rather than having the money sit in a bank they can be getting a high interest over two or three years with the remainder due in full at the end of the term.
When the term draws to a close you need to be able to refinance the cost, or you could sell. Unless you hit a real bad market the value of the house should have risen in that time.
Most mortgage lenders merely want to make a great investment. While your local bank could still shy away there are a lot of financial lenders that would like to make a deal. Financiers prefare property investing. The mortgage is mostly based on 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 do not care what sort of money you make. Conclude the deal with a second mortgage created with the seller. If you default they can eventually foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the whole picture. It is good that seller and buyer can work together. If they can’t wait for a sale, you may still give them their initial price with a little versatility on their part.