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Are you thinking of investing in property? However, you don’t have enough cash to do so. Right here is a tip you can use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your best guess is to find a property that the owner has great interest in offering it, whether because they are moving, divorce, or frustration with tenants.
Actually, if you are currently renting and thinking of using this approach perhaps the owner would be happy to help you out! There are a few variations that may be used depending on 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 simplest method 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 cannot get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make obligations while the property remains in the seller’s name.
You take over the first mortgage and get a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – 2 or 3 years. Instead of having the money stay in a bank they can be getting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term ceases you need to be able to refinance the cost, or else you can sell. Unless you struck an actual bad market the value of the home should have risen in that time.
Most mortgage lenders merely want to make a good investment. While your local bank may still be lacking confidence there are lots of financial lenders that would like to make a deal. Financiers prefare property investing. The mortgage is mostly based on 60-70% of the value of the property, so as long as they know they get their money back in the value of the estate if you default, they do not care what sort of revenue you make. Conclude the deal with a 2nd mortgage created with the seller. In case you default they could still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the whole picture. It is better that seller and buyer can work hand in hand. If they can’t wait for a sale, you may still give them their initial price with a little versatility on their part.