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Now is the time to buy residential real estate. I have been in the real estate investing business for more than 20 years, and all the signs are there:
The stock market is near all-time highs
Debt market yields are still historically low
Supply and demand factors in residential rentals strongly favor landlords and other investors
As of the middle of 2018, buying rental real estate seems like a wonderful opportunity to get a solid long-term return with low risk.
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Are you thinking of investing in real estate? However you don’t have enough cash to do this. In this article is a tip you can use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your better gamble is to find a property that the owner has great desire for selling, whether because of moving, divorce, or frustration with the people renting the place.
Actually, if you are currently renting and thinking of using this approach perhaps your landlord would be happy to help you out! There are a few variations that may be used depending upon you and your seller. Do they want 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 payments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to assume 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 get a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – 2 or three years. Instead of having the money stay in a bank they could be getting a high interest over two or three years with the remainder 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 perhaps you could sell. Unless you hit a genuine bad market the value of the property should have risen in that time.
A lot of mortgage lenders merely need to make a good investment. While your local bank could still shy away there are plenty of financial lenders that would wish to make a deal. Financiers like real estate. 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 kind of income 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 in the proceeds.
Now you can see the complete picture. It is better that seller and buyer may work hand in hand. If they can’t wait for a sale, you can still give them their asking price with a little versatility on their part.