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Are you thinking of investing in real estate? However you do not have enough money to accomplish this. Here is a tip you can use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your better guess is to locate a property that the owner has great interest in offering it, whether because they are moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you are currently renting and thinking about using this technique perhaps the owner would be happy to assist you! There are a few variations that may be used depending on you and your vendor. Do they need the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The simplest method is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the original lender to presume the mortgage. If you cannot get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make payments while the property stays in the seller’s name.
You take over the first 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. 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 need to be able to refinance the cost, or you could sell. Unless you hit a genuine bad market the value of the home should have risen by then.
Most mortgage lenders merely need to make a good investment. While your local bank may still be lacking confidence there are lots of financial lenders that would wish to make a deal. Financiers prefare property investing. 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 estate if you default, they don’t care what kind of money you make. Complete the deal with a second mortgage done 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 see the complete picture. It is better that seller and buyer can work hand in hand. In the event they can’t wait for a sale, you can still give them their asking price with a little versatility on their part.