The battle lines have been drawn in the war over California rent control. Tenant advocates announced recently they have enough signatures for a ballot initiative to repeal the Costa-Hawkins Act, which could open the floodgates for extreme rent control in California and put some landlords right out of business.
Why Rent Control Doesn’t Work
While the idea of rent control may sound like a nice one (help keep real estate affordable for families who otherwise would be forced to mo…
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Are you contemplating investing in real estate? However you do not have enough money to accomplish 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 all sellers will be interested (or even understand) the concept outlined. Your best guess is to find a property that the owner has great desire for selling, whether because they are moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you are currently renting and considering using this technique perhaps your landlord would be happy to help you out! 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 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 may 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 first mortgage and make 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 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 need to be able to refinance the cost, or perhaps you can sell. Unless you hit an actual bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely want to make a great investment. While your local bank could still be lacking confidence there are a lot of financial lenders that would wish to make a deal. Financiers like real estate. The mortgage is usually based on 60-70% of the value of the land, 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 could still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can observe 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 initial price with a little versatility on their part.