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Are you contemplating investing in property? But you don’t have enough money to accomplish this. In this article 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 best guess is to locate a property that the owner has great interest in selling, whether because they are moving, a divorce settlement, or frustration with tenants.
Actually, if you maybe currently renting and considering using this technique perhaps your landlord would be happy to assist you! There are a few variations that can be used depending on you and your seller. Do they need the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The easiest method is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will have 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 payments while the property stays in the seller’s name.
You take over the original mortgage and create a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – 2 or 3 years. Rather than having the money sit 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 investment term.
When the term ceases you ought to be able to refinance the cost, or you could sell. Unless you struck 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 wish to make a deal. Financiers like real estate. The mortgage is usually around 60-70% of the value of the land, so as long as they understand they get their money back in the value of the property if you default, they do not care what kind of revenue you make. Conclude the deal with a second mortgage done with the seller. In case you default they can still foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can see the complete picture. It is good that seller and buyer may work together. If they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.