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Are you contemplating investing in real estate? However you do not have enough money to accomplish this. In this article is a tip you are able to use as long as the person selling the property is willing to negotiate with you.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your best gamble is to locate a property that the owner has great desire for selling, whether because of moving, a divorce settlement, 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 glad to help you out! There are a few variations that could be used depending upon you and your vendor. Do they need the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The simplest method is to take over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the original lender to presume the mortgage. If you cannot get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make payments while the property remains in the seller’s name.
You take over the first mortgage and get a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – two or three years. Rather than having the money stay 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 investment term.
When the term draws to a close you should be able to refinance the cost, or else you could sell. Unless you strike 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 like 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 don’t care what kind of money you make. Complete the deal with a second mortgage created with the seller. In case you default they could still foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the entire 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 asking price with a little versatility on their part.