This article was originally featured in March 2018 Think Realty Magazine and written by Julie Ziglar Norman, realtor with Prime Properties Realty.
Investing in real estate is one thing. Building wealth by investing in real estate is another. The first scenario is often a short-term, one-off plan; the second represents a plan that has been well constructed and committed to paper, which constitutes a goal.
Set a goal for your real estate investing, then h…
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Are you thinking of investing in property? But you do not have enough cash to do so. Right 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 wager is to locate a property that the owner has great desire for offering it, whether because of moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you maybe currently renting and considering using this strategy perhaps your landlord would be glad to help you out! There are some variations that may be used depending on you and your vendor. Do they need the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The simplest method is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the first lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make payments while the property stays 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 three years. Instead of having the money sit 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 term.
When the term draws to a close you need to be able to refinance the cost, or perhaps you can sell. Unless you struck a real bad market the value of the home should have risen in that time.
Most mortgage lenders merely need to make a good investment. While your local bank could still be scared there are plenty 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 property, 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 kind of money you make. Conclude the deal with a 2nd mortgage done with the seller. If you default they can eventually foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can observe the whole picture. It is better that seller and buyer may work together. In the event they can’t wait for a sale, you could still give them their initial price with a little overall flexibility on their part.