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Are you thinking of investing in real estate? However, you don’t have enough cash to accomplish this. Here is a tip you are able to 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 very best wager is to find a land that the owner has great interest in offering it, whether because they are moving, divorce, or frustration with tenants.
Actually, if you are currently renting and considering using this approach perhaps your landlord would be glad to help you out! There are a few variations that may be used depending on you and your seller. Do they desire the market price or are they just eager to get out of the monthly payments – perhaps 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 cannot get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make obligations while the property remains 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 period – 2 or 3 years. Rather than having the money sit in a bank they can be collecting a high interest over two or three years with the rest 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 property should have risen in that time.
A lot of mortgage lenders merely need to make a good investment. While your local bank may still be lacking confidence there are a lot of financial lenders that would want 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 understand they get their money back in the value of the land if you default, they don’t care what kind of money you make. Complete the deal with a 2nd mortgage done with the seller. In case you default they could 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 better that seller and buyer may work hand in hand. If they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.