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Are you thinking of investing in real estate? However you don’t have enough cash to accomplish this. In this article is a tip you may use as long as the property seller is willing to negotiate with you.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your very best guess is to locate a property 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 technique perhaps your landlord would be happy to assist you! There are several variations that can be used depending on you and your owner. Do they desire the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The easiest method is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the first lender to assume the mortgage. If you can’t get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make obligations while the property remains in the seller’s name.
You take over the original mortgage and create 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 in a bank they can be getting a high interest over two or three years with the rest due in full at the end of the term.
When the term ends you should be able to refinance the cost, or perhaps you can sell. Unless you strike a genuine bad market the value of the house should have risen by then.
A lot of mortgage lenders merely need to make a great investment. While your local bank may still shy away there are lots of financial lenders that would like to make a deal. Financiers prefare real estate. The mortgage is usually 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 kind of income you make. Complete the deal with a second mortgage done with the seller. If you default they can 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 can work together. If they can’t wait for a sale, you could still give them their initial price with a little overall flexibility on their part.