When Third Avenue Real Estate Fund announced it would buy $10 million worth of shares in a real estate investment trust (REIT) with extensive holdings in Crystal City, an urban neighborhood in the southeastern corner of Arlington County, Virginia, it cited, among other factors, the likelihood that Amazon’s second national headquarters, commonly referred to as HQ2, would be located in the area.
“Washington D.C. seems to rank near the top of the [short] list,” the fund wrote in a l…
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Are you thinking of investing in real estate? But you do not have enough money to accomplish this. In this article is a tip you can use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your better gamble is to find a land that the owner has great desire for selling, whether because they are moving, divorce, or frustration with the people renting the place.
Actually, if you maybe currently renting and thinking of using this approach perhaps the owner would be happy to assist you! There are some variations that can be used depending upon you and your vendor. Do they want the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The easiest method is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the original lender to assume the mortgage. If you cannot get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make obligations while the property stays in the seller’s name.
You take over the original 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. Rather than having the money sit down in a bank they could be collecting a high interest over 2 or 3 years with the remainder due in full at the end of the term.
When the term ends you should be able to refinance the cost, or perhaps you can sell. Unless you hit a genuine bad market the value of the house should have risen in that time.
Most mortgage lenders merely need to make a good investment. While your local bank may still be scared there are plenty 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 understand they get their money back in the value of the land if you default, they don’t care what sort of income you make. Complete the deal with a second mortgage created with the seller. In case 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 good that seller and buyer can work together. In the event that they can’t wait for a sale, you may still give them their initial price with a little versatility on their part.