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Are you thinking of investing in real estate? However, you do not have enough cash to do so. Here is a tip you may use as long as the property seller is willing to negotiate along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your very best wager is to locate a land that the owner has great interest in offering it, whether because they are moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you are currently renting and thinking about using this technique perhaps your landlord would be happy to assist you! There are several variations that could be used depending upon you and your seller. Do they desire the market price or are they just desperate 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 presume the mortgage. If you can’t get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the original mortgage and get a second 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 sit in a bank they could 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 perhaps you can sell. Unless you hit an actual bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely want to make a good investment. While your local bank could still be lacking confidence there are a lot of financial lenders that would wish 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 money you make. Conclude the deal with a 2nd mortgage done with the seller. In case you default they could still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see the entire picture. It is better that seller and buyer may work hand in hand. If they can’t wait for a sale, you may still give them their asking price with a little versatility on their part.