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Are you thinking of investing in real estate? However, you don’t have enough money to accomplish this. In this article is a tip you can use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your best wager is to find a property that the owner has great desire for selling, whether because of moving, divorce, or frustration with tenants.
Actually, if you maybe currently renting and considering using this strategy perhaps your landlord would be happy to assist you! There are some variations that could be used depending upon you and your vendor. Do they want the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The easiest method is to take over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to presume the mortgage. If you can’t get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make repayments while the property remains 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 period – two or three years. Instead of having the money stay 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 need to be able to refinance the cost, or you can sell. Unless you hit a real bad market the value of the home 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 plenty of financial lenders that would wish to make a deal. Financiers like property investing. The mortgage is mostly based on 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 don’t care what sort of revenue you make. Conclude the deal with a 2nd mortgage created with the seller. If you default they can still foreclose on the property and sell it, settling the existing mortgage with 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 can still give them their asking price with a little overall flexibility on their part.