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Are you thinking of investing in real estate? However you don’t have enough cash to do this. In this article is a tip you may use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your very best wager is to locate a land that the owner has great desire for selling, whether because of moving, divorce, or frustration with the people renting the place.
Actually, if you maybe currently renting and thinking about using this approach perhaps your landlord would be glad to assist you! There are some variations that may be used depending upon you and your seller. Do they need the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The easiest method is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume the mortgage. If you cannot get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make obligations 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 property with the seller. Offer a high, interest-only payment for a short time frame – 2 or three years. Instead of having the money sit in a bank they can be collecting a high interest over 2 or 3 years with the rest due in full at the end of the term.
When the term ends you need to be able to refinance the cost, or perhaps you could sell. Unless you strike a real bad market the value of the property should have risen by then.
A lot of mortgage lenders merely need to make a great investment. While your local bank may still be lacking confidence there are plenty of financial lenders that would like to make a deal. Financiers like property investing. The mortgage is mostly based on 60-70% of the value of the land, so as long as they understand they get their money back in the value of the estate if you default, they do not care what kind of revenue you make. Conclude the deal with a 2nd mortgage created with the seller. If you default they could still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can observe the complete picture. It is better that seller and buyer can 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 overall flexibility on their part.