When they hear the term “hot market,” most real estate investors I know immediately assume that I, as a realtor, will love working in an area with this description. After all, properties are selling for big bucks, which means I can earn higher commissions, right? Well, yes and no. A hot market, which is usually also a seller’s market, can be a great thing for a real estate agent or a realtor, just as it tends to be a positive for sellers. However, as in any market, you must u…
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Are you contemplating investing in real estate? 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 with you.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your best wager is to locate a property that the owner has great interest in offering it, whether because of moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you are currently renting and considering using this strategy perhaps the owner would be glad to assist you! There are a few variations that can be used depending upon you and your vendor. Do they desire the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The simplest method is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the original lender to presume the mortgage. If you can’t get approved for an assumable mortgage you could 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 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 period – 2 or three years. Rather than having the money stay in a bank they could be collecting a high interest over 2 or 3 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 strike an actual bad market the value of the property should have risen by then.
A lot of mortgage lenders merely want to make a good 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 real estate. The mortgage is usually around 60-70% of the value of the property, so as long as they know they get their money back in the value of the estate 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 still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can observe the complete picture. It is better that seller and buyer can work together. In the event they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.