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Are you contemplating investing in real estate? However you don’t have enough cash to do so. 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 interested (or even understand) the concept outlined. Your better wager is to find a land that the owner has great interest in selling, whether because of moving, divorce, or they are frustrated with the folks renting the property.
Actually, if you maybe currently renting and thinking of using this strategy perhaps your landlord would be happy to help you out! There are some variations that could be used depending on you and your seller. Do they desire 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 have to be approved by the initial lender to presume the mortgage. If you can’t get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make payments while the property stays in the seller’s name.
You take over the first 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 period – 2 or 3 years. Instead of having the money sit down in a bank they can be getting a high interest over two or three years with the remainder due in full at the end of the term.
When the term draws to a close you need to be able to refinance the cost, or else you could sell. Unless you strike a genuine bad market the value of the home should have risen by then.
Most mortgage lenders merely need to make a good investment. While your local bank may still be lacking confidence 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 don’t care what sort of money you make. Conclude the deal with a second mortgage created with the seller. In case you default they can 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 better that seller and buyer can work hand in hand. In the event that they can’t wait for a sale, you can still give them their asking price with a little overall flexibility on their part.