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Are you contemplating investing in real estate? However, you don’t have enough cash to accomplish this. In this article is a tip you can 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 guess is to find a land that the owner has great interest in offering it, whether because of moving, divorce, or they are frustrated with tenants.
Actually, if you are 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 upon you and your owner. Do they need the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The simplest way is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the initial 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 payments while the property remains in the seller’s name.
You take over the first mortgage and make a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – two or three years. Rather than having the money sit down in a bank they can be getting a high interest over 2 or 3 years with the remainder due in full at the end of the term.
When the term ends you should be able to refinance the cost, or you could sell. Unless you struck a real bad market the value of the house should have risen by then.
A lot of 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 want to make a deal. Financiers like property investing. The mortgage is usually based on 60-70% of the value of the land, so as long as they understand they get their money back in the value of the estate if you default, they do not care what kind of revenue 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 down the existing mortgage in the proceeds.
Now you can see the whole picture. It is good that seller and buyer can work together. If they can’t wait for a sale, you can still give them their asking price with a little overall flexibility on their part.