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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 property seller is willing to negotiate along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your better guess is to locate a land that the owner has great interest in offering it, whether because they are moving, divorce, or they are frustrated with tenants.
Actually, if you are currently renting and considering using this strategy perhaps your landlord would be happy to assist you! There are some 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 from the monthly payments – maybe facing foreclosure?
The simplest way is to take over their mortgage payments – 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 may also try a ‘subject to’ assumption where you merely make repayments 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 house with the seller. Offer a high, interest-only payment for a short time period – two or three 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 remainder due in full at the end of the term.
When the term draws to a close you should be able to refinance the cost, or you can sell. Unless you struck a genuine 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 may still shy away there are lots of financial lenders that would like to make a deal. Financiers prefare property investing. The mortgage is usually based on 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 revenue you make. Conclude 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 with 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 may still give them their asking price with a little overall flexibility on their part.