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Are you thinking of investing in real estate? However you do not have enough cash to accomplish this. In this article is a tip you can use as long as the property seller is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your best wager is to find a property that the owner has great desire for offering it, whether because they are moving, divorce, or frustration with the people renting the place.
Actually, if you maybe currently renting and considering using this strategy perhaps the owner would be glad to assist you! There are some variations that could be used depending upon you and your vendor. Do they want the market price or are they just eager to get out from the monthly payments – perhaps 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 assume the mortgage. If you can’t get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make payments while the property stays in the seller’s name.
You take over the original mortgage and create a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – two or three years. Instead of having the money stay in a bank they can be getting a high interest over 2 or 3 years with the rest due in full at the end of the investment term.
When the term ends you need to be able to refinance the cost, or else you could sell. Unless you struck an actual bad market the value of the house 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 a lot 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 land, so as long as they understand they get their money back in the value of the property if you default, they do not care what kind of money you make. Conclude the deal with a second mortgage created with the seller. If you default they can still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can observe the complete picture. It is good that seller and buyer can work together. If they can’t wait for a sale, you could still give them their asking price with a little overall flexibility on their part.