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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 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 best wager is to find a property that the owner has great interest in selling, whether because they are moving, divorce, or they are frustrated with the people renting the place.
Actually, if you are currently renting and considering using this approach perhaps the owner would be glad to assist you! There are several variations that can be used depending upon you and your vendor. Do they want the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The simplest way is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the original lender to presume the mortgage. If you can’t get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the original mortgage and create a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – 2 or 3 years. Instead of having the money sit down in a bank they could be collecting a high interest over 2 or 3 years with the rest 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 hit an actual bad market the value of the home should have risen in that time.
A lot of mortgage lenders merely need to make a good investment. While your local bank may still shy away there are lots of financial lenders that would want to make a deal. Financiers prefare property investing. The mortgage is mostly around 60-70% of the value of the land, 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 income you make. Complete the deal with a 2nd mortgage done with the seller. If you default they can still foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can see the whole picture. It is good that seller and buyer can work hand in hand. If they can’t wait for a sale, you may still give them their asking price with a little overall flexibility on their part.