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Are you thinking of investing in real estate? However, you don’t have enough cash to do this. Here is a tip you can 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 best gamble is to find a property that the owner has great desire for selling, whether because they are moving, divorce, or frustration with tenants.
Actually, if you are currently renting and considering using this technique perhaps your landlord would be glad to assist you! There are a few 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 of the monthly payments – maybe facing foreclosure?
The simplest way is to consider taking over their mortgage payments – 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 may also 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 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – two or 3 years. Rather than having the money sit down in a bank they could be getting a high interest over 2 or 3 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 hit an actual bad market the value of the home should have risen by then.
A lot of mortgage lenders merely want to make a great investment. While your local bank could still be scared there are plenty of financial lenders that would like to make a deal. Financiers prefare property investing. The mortgage is usually 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 estate if you default, they don’t care what sort of revenue you make. Complete the deal with a 2nd mortgage created with the seller. In case you default they could still foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can observe the complete picture. It is good that seller and buyer may work hand in hand. If they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.