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Are you thinking of investing in real estate? But you don’t have enough cash to do this. Right here is a tip you can use as long as the property seller is willing to negotiate with you.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your very best wager is to locate a land that the owner has great desire for offering it, whether because of moving, divorce, or they are frustrated with the people renting the place.
Actually, if you maybe currently renting and thinking about using this technique perhaps your landlord would be happy to help you out! There are some variations that could be used depending on you and your owner. Do they desire the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The simplest method is to take over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the original lender to assume the mortgage. If you cannot get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make payments while the property stays in the seller’s name.
You take over the original mortgage and get a second mortgage on the remaining cost of the house 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 collecting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term ends you need to be able to refinance the cost, or perhaps 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 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 prefare real estate. 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 land if you default, they don’t care what kind of money you make. Conclude 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 observe the whole picture. It is good that seller and buyer may work together. If they can’t wait for a sale, you can still give them their asking price with a little overall flexibility on their part.