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Are you contemplating investing in property? But you don’t have enough cash to do this. Here is a tip you may use as long as the property seller is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your better guess is to find a land that the owner has great interest in offering it, whether because they are moving, divorce, or frustration with the people renting the place.
Actually, if you are currently renting and considering using this technique perhaps your landlord would be glad to help you out! There are several variations that could be used depending upon you and your owner. Do they need the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The simplest way is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to assume the mortgage. If you cannot get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make repayments 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 period – two or 3 years. Instead of having the money sit down in a bank they can be collecting a high interest over 2 or 3 years with the remainder due in full at the end of the investment term.
When the term ends you need to be able to refinance the cost, or you can sell. Unless you struck a genuine bad market the value of the house should have risen in that time.
Most mortgage lenders merely need to make a great investment. While your local bank could still be scared there are lots of financial lenders that would like to make a deal. Financiers prefare real estate. The mortgage is usually based on 60-70% of the value of the property, so as long as they know 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 can still foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can observe the entire picture. It is good that seller and buyer can work together. If they can’t wait for a sale, you may still give them their asking price with a little versatility on their part.