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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 along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your best wager is to find a property that the owner has great desire for offering it, whether because of moving, divorce, or frustration with the people renting the place.
Actually, if you maybe currently renting and thinking of using this strategy perhaps the owner would be happy to assist you! There are several variations that could be used depending upon you and your vendor. Do they desire the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The simplest way is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the first lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make payments while the property remains 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 frame – 2 or 3 years. Rather than having the money sit in a bank they could be getting a high interest over 2 or 3 years with the rest due in full at the end of the term.
When the term draws to a close you ought to be able to refinance the cost, or perhaps you can sell. Unless you strike a real bad market the value of the home should have risen in that time.
Most mortgage lenders merely need to make a good investment. While your local bank could still be scared there are a lot of financial lenders that would wish to make a deal. Financiers like real estate. The mortgage is mostly around 60-70% of the value of the land, so as long as they know they get their money back in the value of the estate if you default, they don’t care what sort of revenue you make. Conclude the deal with a second mortgage done with the seller. If you default they could still foreclose on the property and sell it, paying off 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 can still give them their asking price with a little versatility on their part.