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Are you contemplating investing in real estate? However, you don’t have enough money to accomplish this. Here is a tip you can use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your very best guess is to find a land that the owner has great desire for offering it, whether because they are moving, divorce, or they are frustrated with the people renting the place.
Actually, if you are currently renting and thinking of using this approach perhaps the owner would be happy to help you out! There are a few variations that can be used depending on you and your seller. Do they want the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The easiest method is to take over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the original lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may as well 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 house with the seller. Offer a high, interest-only payment for a short time period – two or 3 years. Rather than having the money sit down in a bank they could be getting a high interest over two or three years with the remainder due in full at the end of the investment term.
When the term ceases you ought to be able to refinance the cost, or perhaps you could sell. Unless you struck a real bad market the value of the home should have risen by then.
A lot of mortgage lenders merely want to make a great investment. While your local bank could still be scared there are lots of financial lenders that would want to make a deal. Financiers like property investing. The mortgage is mostly based on 60-70% of the value of the property, 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 money you make. Conclude the deal with a 2nd mortgage done with the seller. If you default they could eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can see the entire picture. It is good that seller and buyer may work hand in hand. If they can’t wait for a sale, you could still give them their asking price with a little overall flexibility on their part.