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Are you contemplating investing in real estate? But you do not have enough money to accomplish this. Here 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 wager is to find 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 maybe currently renting and thinking about using this approach perhaps the owner would be happy to help you out! There are some variations that can be used depending upon you and your seller. Do they want the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The simplest method is to consider taking over their mortgage obligations – 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 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 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 – 2 or 3 years. Instead of having the money sit 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 investment term.
When the term draws to a close you ought to be able to refinance the cost, or else you can sell. Unless you hit a genuine bad market the value of the home should have risen in that time.
Most mortgage lenders merely need to make a great investment. While your local bank may still be lacking confidence there are plenty of financial lenders that would wish to make a deal. Financiers like real estate. The mortgage is usually based on 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 do not care what sort of income you make. Complete the deal with a 2nd mortgage created 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 entire picture. It is better that seller and buyer may work together. In the event they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.