In a seller’s market, you might have to buy a property that needs renovation to secure a good deal. If you’ve never renovated a property before, this can seem like a daunting task. Most investors have heard horror stories of the $10,000 renovation that ended up costing $100,000, and if you don’t go in with […]…
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Are you contemplating investing in property? However, you do not have enough cash to do so. Right here is a tip you can use as long as the property seller is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your best wager is to find a property that the owner has great desire for selling, whether because they are moving, divorce, or they are frustrated with the folks renting the property.
Actually, if you are currently renting and thinking about using this approach perhaps your landlord would be happy to assist you! There are several 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 simplest method is to consider taking over their mortgage repayments – 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 obligations while the property stays in the seller’s name.
You take over the first mortgage and make 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 three years. Rather than 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 strike an actual bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely want to make a great investment. While your local bank may 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 usually around 60-70% of the value of the land, so as long as they understand they get their money back in the value of the estate 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 could eventually foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can see the whole picture. It is better that seller and buyer may work hand in hand. In the event they can’t wait for a sale, you may still give them their initial price with a little versatility on their part.