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Are you contemplating investing in property? But you don’t have enough cash to do this. Here is a tip you may 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 very best gamble is to locate a land that the owner has great interest in offering it, whether because of moving, a divorce settlement, or frustration with tenants.
Actually, if you are currently renting and considering using this strategy perhaps your landlord would be glad to assist you! There are some variations that could be used depending upon you and your seller. Do they need the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The easiest way is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the original 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 remains in the seller’s name.
You take over the first mortgage and get a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – two or three years. Rather than having the money sit down in a bank they can be getting a high interest over two or three years with the remainder due in full at the end of the term.
When the term ends you need to be able to refinance the cost, or you could sell. Unless you struck an actual bad market the value of the property should have risen by then.
Most mortgage lenders merely want to make a great investment. While your local bank could still be scared there are a lot of financial lenders that would wish to make a deal. Financiers like real estate. The mortgage is mostly based on 60-70% of the value of the land, so as long as they know they get their money back in the value of the land if you default, they don’t care what sort of income you make. Conclude the deal with a second mortgage done with the seller. If you default they could eventually foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can see the complete picture. It is better 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 versatility on their part.