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Are you thinking of investing in real estate? However, you don’t have enough cash to do so. In this article 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 better 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 the people renting the place.
Actually, if you maybe currently renting and considering using this strategy perhaps the owner would be glad to help you out! There are a few variations that may be used depending on you and your vendor. Do they want the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The simplest method is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the original lender to assume the mortgage. If you can’t get approved for an assumable mortgage you may 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 original 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 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 should be able to refinance the cost, or else you can sell. Unless you struck a genuine bad market the value of the home should have risen in that time.
A lot of mortgage lenders merely want to make a great investment. While your local bank could still shy away there are plenty 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 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 income you make. Conclude the deal with a second mortgage created 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 see the complete picture. It is good that seller and buyer can work together. In the event that they can’t wait for a sale, you can still give them their initial price with a little versatility on their part.