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Are you contemplating investing in real estate? However you don’t have enough cash to do this. In this article is a tip you are able to use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your best gamble is to find a property that the owner has great interest in offering it, whether because they are moving, divorce, or frustration with tenants.
Actually, if you maybe currently renting and thinking of using this strategy perhaps the owner would be glad to help you out! There are a few variations that can be used depending on you and your vendor. Do they need the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The easiest way is to consider taking over their mortgage payments – 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 could as well try a ‘subject to’ assumption where you merely make repayments while the property stays in the seller’s name.
You take over the original mortgage and create a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – two or 3 years. Rather than having the money stay 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 investment term.
When the term ceases you should be able to refinance the cost, or you could sell. Unless you hit a real bad market the value of the home should have risen by then.
Most 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 like 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 understand they get their money back in the value of the property if you default, they do not care what kind of revenue you make. Conclude the deal with a 2nd mortgage done with the seller. If you default they could eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can see the entire picture. It is better that seller and buyer may work hand in hand. In the event they can’t wait for a sale, you may still give them their asking price with a little versatility on their part.