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Are you contemplating investing in real estate? However, you do not have enough cash to do this. In this article is a tip you can 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 better gamble is to locate a property that the owner has great interest in offering it, whether because of moving, a divorce settlement, or they are frustrated with tenants.
Actually, if you are currently renting and thinking about using this strategy perhaps the owner would be happy to help you out! There are a few variations that may be used depending on you and your seller. Do they want the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The easiest way is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the original lender to presume the mortgage. If you can’t get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the original 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 frame – two or three 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 remainder due in full at the end of the investment term.
When the term draws to a close you should be able to refinance the cost, or perhaps you can sell. Unless you strike a real bad market the value of the home should have risen by then.
Most mortgage lenders merely want to make a good investment. While your local bank may still shy away there are plenty of financial lenders that would want to make a deal. Financiers prefare real estate. The mortgage is mostly based on 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 do not care what kind of money you make. Conclude the deal with a 2nd mortgage created with the seller. In case you default they can eventually foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can see the entire picture. It is good that seller and buyer can work hand in hand. In the event that they can’t wait for a sale, you could still give them their asking price with a little versatility on their part.