According to a new study from RENTCafé, Millennials will not only spend more on rent in their first decade as adults; they will also spend nearly half their income on their rental housing. “Many Millennials find renting more affordable and hassle-free than buying,” observed RENTCafé blogger Florentina Sarac. However, she went on, the generational preference for renting is not always so much a preference as a necessity. Millennials are making more money than previous generations, but the…
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Are you contemplating investing in real estate? However, you don’t have enough cash to accomplish 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 every seller will be interested (or even understand) the concept outlined. Your better gamble is to locate a land that the owner has great desire for selling, whether because of moving, divorce, or frustration with the folks renting the property.
Actually, if you are currently renting and thinking about using this strategy perhaps the owner would be glad to assist you! There are a few variations that can be used depending on you and your seller. Do they desire the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The simplest way is to take over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to assume the mortgage. If you can’t get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make payments while the property remains in the seller’s name.
You take over the first mortgage and get a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – 2 or three years. Instead of having the money sit in a bank they can be collecting 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 should be able to refinance the cost, or else you could sell. Unless you hit a genuine bad market the value of the home should have risen by then.
Most mortgage lenders merely want to make a great investment. While your local bank may still be scared there are lots of financial lenders that would like to make a deal. Financiers like property investing. The mortgage is mostly 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 do not care what sort of revenue you make. Complete the deal with a second mortgage done with the seller. If you default they could still foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can see the entire 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 asking price with a little overall flexibility on their part.