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Are you thinking of investing in real estate? But you do not have enough cash to do so. Right 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 interested (or even understand) the concept outlined. Your very best guess is to locate a property that the owner has great interest in offering it, whether because they are moving, divorce, or they are frustrated with the people renting the place.
Actually, if you maybe currently renting and considering using this strategy perhaps the owner would be happy to assist you! There are a few variations that can 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 way is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume the mortgage. If you cannot get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make payments while the property stays in the seller’s name.
You take over the first mortgage and get a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – two or 3 years. Instead of having the money sit down in a bank they can be collecting a high interest over two or three years with the remainder due in full at the end of the term.
When the term ceases you should be able to refinance the cost, or you can sell. Unless you struck a real bad market the value of the property should have risen in that time.
Most mortgage lenders merely need to make a good investment. While your local bank could still shy away there are lots of financial lenders that would wish to make a deal. Financiers like real estate. The mortgage is mostly 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 estate if you default, they don’t care what kind of revenue you make. Complete the deal with a 2nd mortgage created with the seller. If you default they could eventually foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can see the complete picture. It is good 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.