In 2015, the Obama administration’s Department of Housing and Urban Development (HUD) issued a controversial fair housing rule under the guidance of HUD’s secretary at the time, Julián Castro. The initiative, titled Affirmatively Furthering Fair Housing (AFFH), was met with trepidation on the part of many in the real estate investing community, since one of the main goals of the ruling was to use locally submitted housing data to look for housing patterns that might violate fair housing …
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Are you contemplating investing in real estate? But you don’t have enough cash to do so. In this article is a tip you may use as long as the person selling the property is willing to negotiate with you.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your better guess is to locate a property that the owner has great desire for offering it, whether because they are moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you maybe currently renting and thinking about using this technique perhaps the owner would be happy to assist you! There are some variations that could be used depending on you and your vendor. Do they desire the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The simplest method is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the initial 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 repayments while the property remains in the seller’s name.
You take over the original 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 frame – two or three years. Instead of having the money sit down in a bank they can 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 draws to a close you should be able to refinance the cost, or you can sell. Unless you hit an actual bad market the value of the property should have risen by then.
Most mortgage lenders merely need to make a great investment. While your local bank could still shy away there are a lot of financial lenders that would want to make a deal. Financiers like property investing. The mortgage is mostly around 60-70% of the value of the land, 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. Complete the deal with a second mortgage done with the seller. In case you default they can eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the entire picture. It is good that seller and buyer can work together. In the event they can’t wait for a sale, you can still give them their asking price with a little versatility on their part.