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Are you contemplating investing in real estate? However you do not have enough cash to do this. In this article is a tip you are able to use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your very best wager is to find a property that the owner has great interest in selling, whether because they are moving, divorce, or they are frustrated with tenants.
Actually, if you are currently renting and thinking about using this strategy perhaps the owner would be glad to assist you! There are some variations that could be used depending upon you and your owner. Do they need the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The easiest way is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to assume the mortgage. If you can’t 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 original mortgage and create a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – two or three years. Instead of having the money sit in a bank they can be collecting a high interest over 2 or 3 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 perhaps you can sell. Unless you struck an actual bad market the value of the property should have risen by then.
A lot of mortgage lenders merely want to make a great investment. While your local bank could still be lacking confidence there are a lot of financial lenders that would want to make a deal. Financiers prefare 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 estate if you default, they don’t care what kind of money you make. Complete the deal with a 2nd mortgage done with the seller. In case you default they can still foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can observe the entire picture. It is good that seller and buyer can work hand in hand. If they can’t wait for a sale, you could still give them their initial price with a little versatility on their part.