As California’s wildfires continue to spread, more homeowners face the destruction of their homes. Just this Sunday, the Mendocino Complex fires (formerly the River and Ranch fires), consumed 8,000 acres. Prior to that, they had burned over 336,000 acres. Today they’re 70% contained, and the California Department of Forestry and Fire Protection estimates the fires will not be completely contained until September.
Much of this particular blaze is burning within the Mendocin…
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Are you contemplating investing in property? However, you don’t have enough cash to do so. Here is a tip you may use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your better wager is to find a property that the owner has great interest in selling, whether because they are moving, divorce, or frustration with the folks renting the property.
Actually, if you are currently renting and considering using this strategy perhaps your landlord would be glad to help you out! There are some variations that could be used depending upon you and your seller. Do they want the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The simplest way is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the first 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. Rather than 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 draws to a close you need to be able to refinance the cost, or you can sell. Unless you hit a real bad market the value of the home should have risen by then.
Most mortgage lenders merely want to make a good investment. While your local bank could still be lacking confidence there are a lot of financial lenders that would like to make a deal. Financiers like property investing. 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 sort of money you make. Conclude 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 off the existing mortgage in the proceeds.
Now you can observe the complete picture. It is good that seller and buyer can work together. In the event they can’t wait for a sale, you may still give them their asking price with a little versatility on their part.