“A dollar today isn’t what it used to be, particularly when it comes to real estate,” says Zillow Senior Economist Aaron Terrazas. This comes from a recent report from Zillow Research regarding home values around the country. However, according to the study, a dollar can buy nearly 20 times more in markets such as Memphis, than in others, like San Francisco. “Figuring out exactly how much space a dollar does—or doesn’t—buy you can be sobering, but enlightening.”
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Are you contemplating investing in real estate? However, you do not have enough money to do this. In this article is a tip you may use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your best gamble is to find a land that the owner has great desire for selling, whether because they are moving, a divorce settlement, or frustration with tenants.
Actually, if you are currently renting and thinking of using this technique perhaps your landlord would be glad to help you out! There are a few variations that could be used depending upon you and your seller. Do they desire the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The simplest method is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume 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 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 could 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 ought to be able to refinance the cost, or you can sell. Unless you struck a real bad market the value of the house should have risen in that time.
Most mortgage lenders merely want to make a great investment. While your local bank may still shy away there are lots of financial lenders that would wish to make a deal. Financiers like property investing. The mortgage is usually based on 60-70% of the value of the land, so as long as they know they get their money back in the value of the land if you default, they do not care what sort of revenue you make. Conclude the deal with a 2nd mortgage created with the seller. In case you default they could 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 better that seller and buyer may work hand in hand. In the event that they can’t wait for a sale, you can still give them their initial price with a little versatility on their part.