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Are you thinking of investing in property? However, you don’t have enough cash to accomplish this. In this article is a tip you can use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your best guess is to locate a land 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 are currently renting and thinking of using this technique perhaps the owner would be happy to assist you! There are some variations that could be used depending on you and your vendor. Do they need 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 payments – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to presume 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 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 period – two or three years. Rather than having the money sit in a bank they can be getting a high interest over 2 or 3 years with the remainder due in full at the end of the investment term.
When the term ends you need to be able to refinance the cost, or else you can sell. Unless you hit an actual bad market the value of the home should have risen in that time.
A lot of mortgage lenders merely need to make a great investment. While your local bank may still be scared there are lots of financial lenders that would wish 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 land if you default, they don’t care what kind of income you make. Complete the deal with a 2nd mortgage done with the seller. If you default they could still foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can see the complete picture. It is better that seller and buyer can work together. In the event they can’t wait for a sale, you could still give them their initial price with a little versatility on their part.