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Are you contemplating investing in property? But you do not have enough cash to do this. Here is a tip you are able to use as long as the person selling the property 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 property that the owner has great interest in offering it, whether because they are moving, divorce, or frustration with the people renting the place.
Actually, if you maybe currently renting and thinking about using this strategy perhaps the owner would be glad to help you out! There are a few variations that could be used depending upon you and your seller. Do they need the market price or are they just desperate to get out from 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 first lender to assume the mortgage. If you cannot get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make payments while the property stays in the seller’s name.
You take over the first mortgage and create 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 three years. Rather than having the money stay 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 ceases you should be able to refinance the cost, or perhaps you can sell. Unless you hit a real bad market the value of the property should have risen in that time.
Most mortgage lenders merely need to make a great investment. While your local bank could still shy away there are lots of financial lenders that would want to make a deal. Financiers prefare property investing. The mortgage is usually 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 don’t care what kind of revenue you make. Conclude the deal with a second mortgage done with the seller. In case you default they can still foreclose on the property and sell it, paying off the existing mortgage with 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 may still give them their asking price with a little overall flexibility on their part.