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Are you contemplating investing in real estate? However, you don’t have enough cash to accomplish this. Here is a tip you are able to use as long as the property seller is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your very best gamble is to find a land that the owner has great interest in offering it, whether because of moving, a divorce settlement, or they are frustrated with tenants.
Actually, if you are currently renting and considering using this technique perhaps your landlord would be happy to assist you! There are a few variations that could be used depending upon you and your seller. Do they need the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The easiest method is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume the mortgage. If you can’t get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make repayments while the property stays in the seller’s name.
You take over the first mortgage and get 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 three years. Rather than having the money sit in a bank they could be collecting a high interest over two or three years with the rest due in full at the end of the term.
When the term ceases you should be able to refinance the cost, or else you could sell. Unless you strike an actual bad market the value of the property should have risen by then.
Most mortgage lenders merely need to make a great investment. While your local bank may still shy away there are a lot of financial lenders that would want to make a deal. Financiers prefare property investing. The mortgage is mostly 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 estate if you default, they do not care what sort of money you make. Conclude the deal with a second mortgage created with the seller. In case you default they can still foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can see the complete picture. It is good that seller and buyer may work together. In the event they can’t wait for a sale, you may still give them their asking price with a little overall flexibility on their part.