Real Estate Investing - Introduction
No Money Down Real Estate Investing
So, you want to invest in real estate, but you don't have a lot of money
- or you have no money - to invest. Believe it or not, this is not a problem,
in most cases. There is a very popular technique that real estate investors
commonly use, that few people outside of the real estate investment community
know about.
Note, however, that this technique does not work for all properties, and
it depends largely on what the seller will agree to. Ideally, for this technique
to work, you must find a seller that is highly motivated to sell, no matter
where that motivation comes from.
Let's first look at buying property with no money to put down. This can be
done when a seller needs to get 'out from under' the property, for financial
reasons. If he can't afford the payments any longer, or he is behind in the
payments, you can take over those payments. This is 'assuming the loan.'
In order to assume a loan, the mortgage lender that holds the title must
approve you. If you are not approved, you could also attempt to get a subject
to assumption of the loan, which means that you will just make payments,
but the property will remain in the current owners name - but not their
possession.
In some cases, the seller may want more than the amount of the balance of
the mortgage. If this is the case, you assume the loan, and then take out
a second mortgage on the property to cover the balance of what the seller
wanted. You can do this is you offer to pay a high interest only payment
over the course of two or three years, with the balance due at the end of
that time period. At the end of that period, refinance the property, or sell
it.
Sometimes sellers don't have an existing mortgage, but they are still anxious
to sell, for a variety of reasons. In this instance, there is no mortgage
to assume, so the seller wants their money. Simply take a mortgage out to
pay for the property.
Mortgage lenders are in the business of making a profit (in the form of interest)
from mortgages. Remember this. If the property is being sold under it's current
market value, and you have decent credit, you can often secure a mortgage,
without putting anything down. It's like having instant equity - the property
is already worth more than the loan, from the very beginning. That 'equity'
looks like a downpayment of sorts to mortgage lenders.
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