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Are you contemplating investing in property? But you do not have enough cash to do this. Here is a tip you are able to use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your very best guess is to find a property that the owner has great interest in selling, whether because of moving, divorce, or frustration with tenants.
Actually, if you are currently renting and thinking of using this strategy perhaps your landlord would be happy to help you out! There are some variations that could be used depending on you and your vendor. Do they desire the market price or are they just desperate 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 have to be approved by the original lender to assume the mortgage. If you can’t get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make repayments while the property stays in the seller’s name.
You take over the first mortgage and get a 2nd 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. Instead of having the money stay in a bank they can be collecting a high interest over 2 or 3 years with the remainder due in full at the end of the investment term.
When the term ceases you need to be able to refinance the cost, or you could sell. Unless you hit a real bad market the value of the property should have risen by then.
Most mortgage lenders merely want to make a good investment. While your local bank may still be scared there are lots of financial lenders that would like to make a deal. Financiers like real estate. 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 property if you default, they don’t care what sort of revenue you make. Conclude the deal with a 2nd mortgage done with the seller. If you default they could still 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 may work hand in hand. In the event they can’t wait for a sale, you can still give them their initial price with a little versatility on their part.