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Are you contemplating investing in real estate? However you don’t have enough cash to do so. In this article is a tip you are able to use as long as the person selling the property is willing to negotiate with you.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your best guess is to find a land that the owner has great interest in offering it, whether because of moving, divorce, or frustration with the people renting the place.
Actually, if you are currently renting and thinking about using this approach perhaps the owner would be happy to help you out! There are several variations that can be used depending upon you and your seller. Do they need the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The simplest method is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the first lender to presume 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 stays in the seller’s name.
You take over the first mortgage and get a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – two or 3 years. Rather than having the money sit down in a bank they can be getting a high interest over two or three years with the remainder due in full at the end of the investment term.
When the term ends you should be able to refinance the cost, or you can sell. Unless you struck an actual bad market the value of the home should have risen in that time.
A lot of mortgage lenders merely want to make a great investment. While your local bank may still shy away there are plenty of financial lenders that would like to make a deal. Financiers prefare 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 property 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 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 can work together. If they can’t wait for a sale, you can still give them their initial price with a little overall flexibility on their part.