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Are you contemplating investing in real estate? But you do not have enough money to do so. Here is a tip you are able to use as long as the person selling the property is willing to negotiate with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your best guess is to find a property that the owner has great interest in selling, whether because they are moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you maybe currently renting and considering 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 owner. Do they want the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The simplest method is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the first lender to presume 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 original mortgage and make a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – two or three years. Instead of having the money stay in a bank they could 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 ends you need to be able to refinance the cost, or else you can sell. Unless you strike a real bad market the value of the property should have risen by then.
Most mortgage lenders merely want to make a great investment. While your local bank may still be scared there are a lot of financial lenders that would like to make a deal. Financiers like property investing. 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 property if you default, they do not care what sort of revenue you make. Complete the deal with a 2nd mortgage done 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 observe the complete picture. It is good that seller and buyer can work together. In the event that they can’t wait for a sale, you could still give them their asking price with a little versatility on their part.