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Are you contemplating investing in real estate? However you don’t have enough money to accomplish this. Here is a tip you may use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your best wager is to find a property that the owner has great interest in selling, whether because they are moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you are currently renting and thinking of using this technique perhaps the owner would be happy to help you out! There are several variations that may be used depending on you and your vendor. Do they need the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The easiest way is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the original lender to presume the mortgage. If you can’t get approved for an assumable mortgage you could 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 make a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – 2 or three years. Instead of having the money sit down in a bank they could be getting a high interest over two or three years with the rest due in full at the end of the term.
When the term ceases 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 home should have risen in that time.
Most mortgage lenders merely want to make a good investment. While your local bank could still be scared there are a lot of financial lenders that would wish to make a deal. Financiers prefare property investing. 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 land if you default, they do not care what kind of money you make. Complete the deal with a second mortgage created with the seller. In case you default they can still foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can see the complete picture. It is better that seller and buyer may work hand in hand. In the event that they can’t wait for a sale, you could still give them their initial price with a little versatility on their part.