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Are you thinking of investing in real estate? However, you do not have enough money to accomplish this. Here is a tip you may use as long as the person selling the property is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your very best guess is to locate a property that the owner has great desire for offering it, whether because they are moving, a divorce settlement, or frustration with the people renting the place.
Actually, if you maybe currently renting and considering using this technique perhaps the owner would be happy to help you out! There are a few variations that can be used depending upon you and your seller. Do they want the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the first lender to assume the mortgage. If you can’t get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make obligations 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 down in a bank they could be collecting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term ends you should be able to refinance the cost, or else you could sell. Unless you strike a genuine bad market the value of the home should have risen by then.
Most mortgage lenders merely need to make a great investment. While your local bank may still be scared there are a lot of financial lenders that would want to make a deal. Financiers prefare real estate. 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 sort of income you make. Complete the deal with a second 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 observe the whole picture. It is good that seller and buyer may work hand in hand. In the event that they can’t wait for a sale, you may still give them their asking price with a little versatility on their part.