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Are you contemplating investing in real estate? However, you do not have enough cash to do this. Right here 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 willing (or even understand) the concept outlined. Your best wager is to locate a property that the owner has great interest in selling, whether because of moving, divorce, or they are frustrated with tenants.
Actually, if you are currently renting and considering using this strategy perhaps your landlord would be glad to help you out! There are several variations that may be used depending on you and your vendor. Do they desire the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The simplest method is to take over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the first lender to assume the mortgage. If you can’t get approved for an assumable mortgage you may 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 get a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – 2 or three years. Instead of having the money stay in a bank they can be getting 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 need to be able to refinance the cost, or perhaps you could sell. Unless you struck a genuine bad market the value of the house should have risen by then.
Most mortgage lenders merely need to make a good investment. While your local bank could still shy away there are a lot of financial lenders that would like to make a deal. Financiers like property investing. The mortgage is usually around 60-70% of the value of the land, so as long as they understand they get their money back in the value of the land if you default, they don’t care what kind of revenue you make. Complete the deal with a 2nd mortgage done with the seller. If you default they could still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the complete picture. It is better that seller and buyer can work together. In the event that they can’t wait for a sale, you can still give them their asking price with a little versatility on their part.