Meet the Expert:
Katrina Rice is a professional kitchen and bath designer with 84 Lumber’s Kitchen & Bath Design Studio in Eighty Four, Pennsylvania. 84 Lumber’s Kitchen & Bath Design Studios exist in more than 30 of 84 Lumber’s 250 stores nationwide and are staffed by experienced professionals. She is an expert in the use of 20/20 Design Software and has a Bachelor of Science in Interior Design from the Art Institute of Pittsburgh.
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Are you contemplating investing in property? But you don’t have enough money to do this. Here is a tip you are able to use as long as the person selling the property is willing to negotiate with you.
To be fair, not every seller will be interested (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 maybe currently renting and thinking about using this strategy perhaps the owner would be glad to assist you! There are some variations that could be used depending on you and your owner. Do they need the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The simplest way is to consider taking over their mortgage payments – 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 may as well try a ‘subject to’ assumption where you merely make obligations while the property stays in the seller’s name.
You take over the first mortgage and create 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 stay in a bank they could be getting a high interest over 2 or 3 years with the rest due in full at the end of the investment term.
When the term draws to a close you should be able to refinance the cost, or you could sell. Unless you hit a genuine bad market the value of the house should have risen by then.
A lot of mortgage lenders merely want to make a good investment. While your local bank could still be lacking confidence there are plenty of financial lenders that would like 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 know they get their money back in the value of the land if you default, they don’t care what sort of money you make. Complete the deal with a second mortgage created 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 see the whole picture. It is good that seller and buyer can work together. If they can’t wait for a sale, you can still give them their asking price with a little versatility on their part.