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Are you thinking of investing in real estate? But you do not have enough cash to do so. Here is a tip you can use as long as the person selling the property is willing to negotiate with you.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your better gamble is to find a land that the owner has great desire for selling, whether because they are moving, divorce, or frustration with the people renting the place.
Actually, if you are currently renting and thinking about using this strategy perhaps the owner would be glad to help you out! There are several variations that may be used depending on you and your owner. Do they want the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The easiest method is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume 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 stays 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 frame – two or three years. Rather than having the money sit in a bank they could be collecting a high interest over 2 or 3 years with the rest due in full at the end of the term.
When the term draws to a close you ought to be able to refinance the cost, or perhaps you could sell. Unless you strike a real 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 shy away there are plenty of financial lenders that would wish to make a deal. Financiers prefare property investing. The mortgage is usually around 60-70% of the value of the property, so as long as they know they get their money back in the value of the land if you default, they do not care what kind of money you make. Complete the deal with a second mortgage created with the seller. If you default they can eventually foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can observe the whole picture. It is good that seller and buyer may work hand in hand. If they can’t wait for a sale, you can still give them their initial price with a little overall flexibility on their part.