In a seller’s market, finding a great rental property can be a challenge. You’re competing against tons of well qualified investors for a limited amount of inventory. To find a good deal you need to have a clear definition of your criteria, be able to move fast, and have several reliable sources for finding deals. […]…
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Are you contemplating investing in property? But you don’t have enough cash to accomplish this. Here is a tip you are able to use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be willing (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, a divorce settlement, or frustration with tenants.
Actually, if you are currently renting and thinking about using this strategy perhaps your landlord would be glad to assist you! There are a few variations that could be used depending on you and your vendor. Do they want the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The simplest way is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume the mortgage. If you cannot get approved for an assumable mortgage you could as well 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 get 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. Instead of having the money stay in a bank they could be getting a high interest over 2 or 3 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 perhaps you could sell. Unless you strike an actual bad market the value of the property should have risen by then.
Most 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 wish to make a deal. Financiers prefare 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 land if you default, they do not care what sort of revenue you make. Complete the deal with a second mortgage done with the seller. In case you default they can eventually foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can see the entire picture. It is better 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 versatility on their part.