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Are you thinking of investing in real estate? But you do not have enough cash to accomplish 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 willing (or even understand) the concept outlined. Your best guess is to locate a property that the owner has great desire for offering it, whether because of moving, a divorce settlement, or they are frustrated with tenants.
Actually, if you maybe currently renting and considering using this technique perhaps your landlord would be happy to assist you! There are several variations that may be used depending upon you and your vendor. Do they need the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The simplest way is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to assume the mortgage. If you cannot get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make obligations while the property remains in the seller’s name.
You take over the first mortgage and make a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – 2 or 3 years. Rather than having the money stay in a bank they can be getting a high interest over 2 or 3 years with the rest due in full at the end of the investment term.
When the term ceases you need to be able to refinance the cost, or else you can sell. Unless you strike an actual bad market the value of the property should have risen by then.
A lot of mortgage lenders merely want to make a good 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 property investing. The mortgage is mostly around 60-70% of the value of the land, so as long as they know they get their money back in the value of the estate if you default, they do not care what kind of revenue you make. Conclude the deal with a second mortgage done with the seller. If you default they can still foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can see the whole picture. It is better that seller and buyer can work hand in hand. If they can’t wait for a sale, you can still give them their initial price with a little overall flexibility on their part.