Rockaster

Are you thinking of investing in real estate? But you do not have enough cash to do so. Here is a tip you 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.

Actually, if you are currently renting and thinking about using this technique perhaps your landlord would be happy to help you out! 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.

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.

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.

Now you can see the whole picture. It is better that seller and buyer can work together. If they can’t wait for a sale, you can still give them their asking price with a little flexibility on their part.

Despite the improving economy, 63 percent of Americans are somewhat or very dissatisfied with their current jobs, according to Paige Wagner, operations manager for the American Real Estate Investor’s Association.

“Most people simply end up in a career without really thinking about it,” Wagner says. “Once someone settles into a job, they usually stay in the same industry even when changing jobs.”

As an example, Wagner reports that only two-tenths of 1 percent of the population are willing to change careers midstream to become real estate investors.

“Most people aren’t willing to put in the effort to learn a new career, even when they can make up to six figures,” she says. “It seems that for most people, just the idea of tackling something new like investing causes them to bring up all kinds of reasons why they shouldn’t get started.”

Wagner says people cite the following reasons for not investing in real estate: It’s the wrong time to get into the real estate market, they don’t have enough money to invest, or they’ve heard too many nightmare stories about being a landlord.

However, at the same time that some people are coming up with reasons to avoid real estate investing, others learn to overcome the obstacles they face.

“With members in all 50 states, we’re able to see investors making money in both ‘up’ markets and ‘down’ markets,” Wagner says. “Some investors even use creative methods of buying to avoid having to come up with down payments. The investors that hate being landlords usually sell on a rent-to-own basis so that their tenant buyer will agree to take care of all the day-to-day maintenance for them.”

Bill Bronchick, president of the Colorado Association of Real Estate Investors, notes that real estate investing strategies have changed from years past.

“It’s a whole new ball game today compared with the way my mom used to invest,” Bronchick says. “Investors these days can get started without cash or credit if they are willing to take the time to get educated.”

Many cities have at least one real estate investor group.

“The monthly meetings and trainings are a good place to meet others who are already investing or interested in doing so,” Bronchick says. “You can also get a feel for whether you are in a hot or a cold market by talking with other investors.”