When wildfires destroyed thousands of homes in California last fall, tens of thousands of residents were displaced. As those households began to seek new places to live and to rebuild, many investors flocked to California as well. This is part of the housing/natural disaster cycle: When disaster strikes, real estate investors play a crucial role in rebuilding. Sometimes, they offer cash for properties damaged beyond repair. Sometimes, they offer services in high demand, such as construction. …
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Are you thinking of investing in property? However you do not have enough money to do so. 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 all sellers will be interested (or even understand) the concept outlined. Your better gamble is to locate a land that the owner has great interest in offering it, whether because of moving, a divorce settlement, or frustration with tenants.
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 may 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 – perhaps facing foreclosure?
The easiest method is to take over their mortgage obligations – 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 also try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the original 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. Instead of having the money sit down in a bank they can be getting a high interest over two or three years with the rest due in full at the end of the term.
When the term ceases you should be able to refinance the cost, or you could sell. Unless you hit a genuine 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 may still shy away there are lots of financial lenders that would wish to make a deal. Financiers prefare property investing. The mortgage is usually around 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 kind of money you make. Conclude the deal with a second mortgage created with the seller. In case you default they could eventually foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can see the entire 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 overall flexibility on their part.