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Are you contemplating investing in real estate? But you don’t have enough money to accomplish this. Here is a tip you can use as long as the person selling the property is willing to negotiate along.
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, divorce, or frustration with the people renting the place.
Actually, if you are currently renting and thinking of using this technique perhaps your landlord would be happy to help you out! There are a few variations that can be used depending on you and your owner. Do they desire the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The simplest method is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to presume 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 property with the seller. Offer a high, interest-only payment for a short time frame – two or 3 years. Instead of having the money sit down in a bank they could be getting 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 need to be able to refinance the cost, or you can sell. Unless you struck a real 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 shy away there are a lot of financial lenders that would want 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 know they get their money back in the value of the property if you default, they don’t care what sort of money you make. Conclude the deal with a 2nd mortgage created with the seller. If you default they could eventually foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can observe the entire picture. It is better 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.