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No Money Down Real Estate Investing
You want to get into real estate
- either for your personal use or for investment purposes
- but you just don't have the cash to get started? What
are you going to do?
There is at least one technique that
virtually anyone can use as long as the property seller
is willing to negotiate with you. To be fair, not every
seller will be interested (or even understand) the concept
outlined. Your best bet is to find a property that the
owner has great interest in selling, whether because
of moving, divorce or frustration with tenants.
In fact, if you are currently renting
and thinking about using this technique perhaps your
landlord would be happy to help you out!
HOW TO BUY WITH NO MONEY DOWN
There are a few variations that can
be used depending on you and your seller. Do they want
the market price or are they just eager to get out from
the monthly payments - perhaps facing foreclosure?
The simplest method is to take over
their mortgage payments - called 'assuming' the mortgage.
You will need to be approved by the original 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 payments while the
property remains in the seller's name.
WHAT IF THEY WANT A HIGHER PRICE?
You take over the original mortgage
AND create a second mortgage on the remaining cost of
the house with the seller. Offer a high, interest-only
payment for a short period of time - 2 or 3 years. Instead
of having the money sit in a bank they can be collecting
a high interest over 2 or 3 years with the remainder
due in full at the end of the term.
When the term ends you should be able
to refinance the cost, or you can sell. Unless you hit
a real bad market the value of the property should have
risen in that time.
WHAT IF THERE'S NO MORTGAGE TO ASSUME?
Easy. Most mortgage lenders merely want
to make a good investment. While your local bank may
still shy away there are plenty of financial lenders
that would love to make a deal.
Financiers like real estate. The mortgage
is usually based on 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 kind of money you make. Complete the deal
with a second mortgage created with the seller. If you
default they can still foreclose on the property and
sell it, paying off the existing mortgage with the proceeds.
As you can see, it can be in the favor
of a buyer and seller to work together - especially
if the seller is motivated. If they can't wait for a
sale, you can still give them their asking price with
a little flexibility on their part.
1howto.com
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