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Are you thinking of investing in real estate? However you do not have enough cash to do so. In this article is a tip you may use as long as the person selling the property is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your very best gamble is to find a land that the owner has great desire for selling, whether because they are moving, divorce, or frustration with the folks renting the property.
Actually, if you are currently renting and thinking of using this approach perhaps the owner would be happy to assist you! There are several variations that could be used depending upon you and your seller. Do they desire the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The easiest method is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the first lender to assume the mortgage. If you can’t get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make obligations while the property stays 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 three years. Rather than having the money stay in a bank they can be collecting a high interest over 2 or 3 years with the rest due in full at the end of the term.
When the term ends you need to be able to refinance the cost, or else you could sell. Unless you strike an actual bad market the value of the house should have risen in that time.
Most mortgage lenders merely want to make a good investment. While your local bank may still be scared there are lots of financial lenders that would like to make a deal. Financiers like property investing. The mortgage is usually around 60-70% of the value of the property, 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 sort of income you make. Conclude the deal with a 2nd mortgage done with the seller. In case you default they could eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the complete picture. It is good 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 initial price with a little versatility on their part.