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Are you contemplating investing in real estate? However you do not have enough cash 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 all sellers will be willing (or even understand) the concept outlined. Your better wager is to locate a land that the owner has great interest in offering it, whether because of moving, divorce, or frustration with tenants.
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 vendor. Do they need the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the original lender to assume 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 original 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 – 2 or 3 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 investment term.
When the term draws to a close you should be able to refinance the cost, or perhaps you can sell. Unless you strike a genuine bad market the value of the house should have risen by then.
A lot of mortgage lenders merely need to make a great investment. While your local bank may still be scared there are lots of financial lenders that would wish to make a deal. Financiers prefare real estate. The mortgage is usually around 60-70% of the value of the land, so as long as they know they get their money back in the value of the land if you default, they don’t care what kind of income you make. Complete the deal with a 2nd mortgage created with the seller. If you default they could still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can observe the complete picture. It is good that seller and buyer may work hand in hand. In the event that they can’t wait for a sale, you can still give them their asking price with a little versatility on their part.