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Are you contemplating investing in real estate? However you don’t have enough cash to do this. In this article is a tip you may use as long as the person selling the property is willing to negotiate with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your best guess is to find a property that the owner has great interest in offering it, whether because of moving, divorce, or frustration with the people renting the place.
Actually, if you maybe currently renting and considering using this approach perhaps the owner would be glad to help you out! There are several variations that can be used depending upon 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 simplest way is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to assume the mortgage. If you can’t get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the first 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 frame – 2 or 3 years. Rather than having the money sit down in a bank they could be collecting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term ends you should be able to refinance the cost, or perhaps you could sell. Unless you strike a real bad market the value of the home should have risen in that time.
Most mortgage lenders merely want to make a great investment. While your local bank could still be scared there are lots 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 property, 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 sort of money you make. Complete the deal with a 2nd mortgage done 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 whole 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.