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Are you contemplating investing in real estate? However, you don’t have enough money to do this. In this article is a tip you can use as long as the person selling the property is willing to negotiate with you.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your better guess is to locate a property that the owner has great interest in selling, whether because they are moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you are currently renting and considering using this approach 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 desire the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The simplest way is to take over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the first 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 payments while the property stays in the seller’s name.
You take over the first mortgage and get 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 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 draws to a close you should be able to refinance the cost, or else you could sell. Unless you strike a genuine bad market the value of the property should have risen by then.
A lot of mortgage lenders merely need to make a good investment. While your local bank may still be scared there are a lot of financial lenders that would want to make a deal. Financiers like real estate. The mortgage is mostly 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 estate if you default, they don’t care what kind of income you make. Complete the deal with a 2nd mortgage done with the seller. If you default they can eventually foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can see the whole picture. It is good that seller and buyer can work together. If they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.