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Are you thinking of investing in real estate? But you don’t have enough cash to do this. In this article is a tip you are able to 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 gamble is to find a property that the owner has great desire for selling, whether because they are moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you are currently renting and thinking of using this technique perhaps your landlord would be happy to assist you! There are a few variations that can be used depending on you and your vendor. Do they want the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The easiest way is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to assume the mortgage. If you cannot get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make obligations while the property remains in the seller’s name.
You take over the first mortgage and get a second mortgage on the remaining cost of the property 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 could be collecting a high interest over two or three years with the remainder due in full at the end of the term.
When the term draws to a close you need to be able to refinance the cost, or else you can sell. Unless you hit a real bad market the value of the house should have risen in that time.
Most mortgage lenders merely want to make a good 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 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 income 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 off the existing mortgage in the proceeds.
Now you can see the entire picture. It is better that seller and buyer can work hand in hand. In the event they can’t wait for a sale, you could still give them their initial price with a little overall flexibility on their part.