Citing information indicating “the labor market has continued to strengthen and that economic activity has been rising at a solid rate,” the Federal Open Market Committee of the Federal Reserve opted to increase the federal funds rate by 25 basis points to 2% this week. Most analysts expected the Fed to raise rates in June after voting against the move in May. In a public statement, the committee cited these reasons for feeling the American economy could handle the rising rates:
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Are you contemplating investing in property? However, you don’t have enough cash to do this. Here is a tip you may 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 guess is to locate a land that the owner has great desire for selling, whether because of moving, divorce, or frustration with tenants.
Actually, if you maybe currently renting and thinking of using this approach perhaps the owner would be happy to help you out! There are some variations that may be used depending on you and your vendor. Do they need the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The simplest way is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the first lender to presume 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 original mortgage and make a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – 2 or 3 years. Instead of having the money stay in a bank they could be collecting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term ends 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 in that time.
Most mortgage lenders merely need to make a great investment. While your local bank may still be lacking confidence there are plenty of financial lenders that would like to make a deal. Financiers like property investing. The mortgage is usually around 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 do not care what kind of income you make. Conclude the deal with a second mortgage created with the seller. If you default they could 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 hand in hand. In the event they can’t wait for a sale, you can still give them their initial price with a little versatility on their part.