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Are you thinking of investing in real estate? However, you don’t have enough cash to do this. Here is a tip you can 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 find a land that the owner has great desire for offering it, whether because of moving, a divorce settlement, or frustration with the people renting the place.
Actually, if you maybe currently renting and thinking about using this strategy perhaps your landlord would be glad to assist you! There are several variations that can be used depending on you and your seller. Do they need the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The easiest method is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the first lender to assume the mortgage. If you cannot get approved for an assumable mortgage you could also 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 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – 2 or 3 years. Rather than having the money sit down in a bank they can be getting a high interest over 2 or 3 years with the rest due in full at the end of the investment term.
When the term ends you ought to be able to refinance the cost, or else you can sell. Unless you strike an actual bad market the value of the house should have risen by then.
Most mortgage lenders merely want to make a great investment. While your local bank could still be scared there are plenty 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 land, so as long as they understand they get their money back in the value of the property if you default, they don’t care what kind of revenue you make. Complete the deal with a second mortgage created with the seller. If you default they can still foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can observe the whole picture. It is better that seller and buyer can work together. In the event that they can’t wait for a sale, you can still give them their asking price with a little versatility on their part.