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Are you thinking of investing in real estate? However you don’t have enough money to do this. In this article is a tip you may use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your very best guess is to find a property that the owner has great interest in offering it, whether because they are moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you maybe currently renting and thinking about using this strategy perhaps your landlord would be happy to help you out! There are a few variations that could be used depending on you and your seller. Do they need the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The simplest way is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to assume the mortgage. If you cannot get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make obligations while the property stays in the seller’s name.
You take over the original 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 frame – two or 3 years. Rather than having the money sit in a bank they could be getting a high interest over two or three years with the rest due in full at the end of the term.
When the term ends you should be able to refinance the cost, or perhaps you could sell. Unless you struck a real bad market the value of the property should have risen in that time.
A lot of mortgage lenders merely need to make a great investment. While your local bank could still shy away there are plenty of financial lenders that would want to make a deal. Financiers like property investing. The mortgage is usually around 60-70% of the value of the land, so as long as they understand they get their money back in the value of the estate if you default, they do not care what sort of income you make. Conclude the deal with a second mortgage done with the seller. In case you default they can eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the entire picture. It is good that seller and buyer can work together. If they can’t wait for a sale, you could still give them their initial price with a little versatility on their part.