For 20 years in some cases, public school buildings in Gary, Indiana, have sat vacant as a target for vandalism, looting, and arson. Now, the Gary School Community Corporation is hoping real estate investors with an eye for community development will come into the area, buy the buildings, and help the community and local real estate recover from that neglect.
“We have not been a good neighbor with these abandoned properties over the last 20 years as the school fell into financial dis…
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Are you contemplating investing in real estate? However you don’t have enough money to accomplish this. In this article is a tip you can use as long as the person selling the property is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your very best gamble is to locate a property that the owner has great desire for offering it, whether because they are moving, a divorce settlement, or they are frustrated with tenants.
Actually, if you maybe currently renting and thinking of using this strategy perhaps your landlord would be happy to assist you! There are some variations that can be used depending upon you and your owner. Do they desire the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The easiest 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 can’t get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make repayments 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 house with the seller. Offer a high, interest-only payment for a short time frame – 2 or 3 years. Instead of having the money sit down in a bank they can be collecting a high interest over two or three years with the rest due in full at the end of the term.
When the term draws to a close you need to be able to refinance the cost, or else you could sell. Unless you struck an actual bad market the value of the home should have risen in that time.
A lot of mortgage lenders merely want to make a good investment. While your local bank may still be scared there are a lot of financial lenders that would like to make a deal. Financiers like 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 property if you default, they don’t care what sort of income you make. Complete the deal with a second mortgage created with the seller. If you default they could eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the whole picture. It is good that seller and buyer can work together. In the event that they can’t wait for a sale, you can still give them their asking price with a little overall flexibility on their part.