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Are you contemplating investing in property? However, you don’t have enough cash to do this. Here is a tip you can use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your very best gamble is to locate a property that the owner has great interest in selling, whether because of moving, divorce, or frustration with the people renting the place.
Actually, if you are currently renting and thinking of using this technique perhaps the owner would be happy to help you out! There are several variations that could be used depending on you and your seller. Do they need the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The simplest method is to take over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the first lender to presume the mortgage. If you cannot 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 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 – two or 3 years. Rather than having the money sit down in a bank they could be getting a high interest over two or three years with the remainder due in full at the end of the investment term.
When the term ceases you should be able to refinance the cost, or perhaps you can sell. Unless you hit a genuine bad market the value of the home should have risen in that time.
Most mortgage lenders merely want to make a great investment. While your local bank could still shy away there are lots 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 property, so as long as they know they get their money back in the value of the property if you default, they don’t care what kind of revenue you make. Complete the deal with a second mortgage done with the seller. If you default they can eventually foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can observe the whole picture. It is better 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 asking price with a little versatility on their part.