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Are you thinking of investing in real estate? But you don’t have enough cash to do so. Right here is a tip you may 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 better gamble is to locate a property that the owner has great interest in offering it, whether because of moving, divorce, or frustration with the people renting the place.
Actually, if you maybe currently renting and thinking of using this strategy perhaps the owner would be happy to help you out! There are some variations that could be used depending upon you and your seller. Do they need the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will have 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 obligations while the property remains in the seller’s name.
You take over the first mortgage and create a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – 2 or 3 years. Rather than 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 investment term.
When the term draws to a close you should be able to refinance the cost, or you could sell. Unless you hit a genuine bad market the value of the house should have risen in that time.
Most mortgage lenders merely need to make a good investment. While your local bank could still be scared there are lots of financial lenders that would wish to make a deal. Financiers like property investing. The mortgage is usually around 60-70% of the value of the property, so as long as they understand they get their money back in the value of the land if you default, they do not care what kind of money you make. Conclude the deal with a 2nd mortgage created with the seller. If you default they can eventually foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can see the entire picture. It is better that seller and buyer may work hand in hand. In the event they can’t wait for a sale, you could still give them their asking price with a little overall flexibility on their part.