Fannie Mae’s Economic and Strategic Research Group recently published a new report in conjunction with University of Southern California researchers in regards to generational housing. According to the report, as baby boomers exit their owner-occupied homes there could be a “void” looming in housing too big for younger generations to fill. “The beginning of a mass homeownership exodus looms on the horizon,” observed one team member. He added, “[This is] fueling fears of a ‘gener…
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Are you contemplating investing in real estate? However you do not have enough cash to do this. Right here is a tip you can use as long as the property seller is willing to negotiate with you.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your better gamble is to find a property that the owner has great interest in selling, whether because of moving, a divorce settlement, or frustration with tenants.
Actually, if you are currently renting and considering using this approach perhaps your landlord would be happy to help you out! There are some variations that can be used depending upon you and your owner. Do they need the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The simplest way is to consider taking over their mortgage payments – 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 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 first mortgage and create a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – two or 3 years. Rather than having the money sit 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 investment term.
When the term ceases you should be able to refinance the cost, or else you can sell. Unless you hit an actual bad market the value of the house should have risen by then.
Most mortgage lenders merely want to make a great investment. While your local bank could still shy away there are a lot of financial lenders that would like to make a deal. Financiers prefare real estate. The mortgage is mostly around 60-70% of the value of the property, so as long as they know they get their money back in the value of the property if you default, they don’t care what kind of money you make. Complete the deal with a 2nd mortgage done with the seller. If you default they can still foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can see the entire picture. It is good that seller and buyer can work hand in hand. In the event that they can’t wait for a sale, you may still give them their asking price with a little overall flexibility on their part.