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Are you thinking of investing in property? But you don’t have enough cash to do so. In this article is a tip you may use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your best wager is to locate a property that the owner has great interest in offering it, whether because they are moving, divorce, or they are frustrated with the folks renting the property.
Actually, if you maybe currently renting and considering using this technique perhaps your landlord would be glad to help you out! There are some variations that can 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 – perhaps facing foreclosure?
The easiest method is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the original 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 payments while the property remains in the seller’s name.
You take over the first mortgage and create a second mortgage on the remaining cost of the house 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 can be getting a high interest over two or three years with the remainder due in full at the end of the investment term.
When the term ceases you ought to be able to refinance the cost, or you could sell. Unless you hit a genuine 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 be scared there are plenty of financial lenders that would like to make a deal. Financiers like property investing. The mortgage is mostly based on 60-70% of the value of the land, 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 income 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, paying off the existing mortgage in the proceeds.
Now you can see the whole picture. It is better that seller and buyer can work hand in hand. In the event that they can’t wait for a sale, you can still give them their initial price with a little overall flexibility on their part.