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Are you thinking of investing in property? However, you do not have enough money to do this. Here is a tip you can use as long as the person selling the property is willing to negotiate along.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your better guess is to locate a land that the owner has great interest in selling, whether because of moving, divorce, or they are frustrated with the folks renting the property.
Actually, if you are currently renting and considering using this strategy perhaps the owner would be glad to assist you! There are a few variations that could be used depending on you and your vendor. Do they need the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the initial 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 create a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – 2 or three years. Rather than 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 investment term.
When the term ceases you ought to be able to refinance the cost, or you can sell. Unless you strike a genuine 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 could still be lacking confidence there are plenty of financial lenders that would wish to make a deal. Financiers prefare property investing. The mortgage is usually 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 land if you default, they do not care what kind of income you make. Complete the deal with a second mortgage created with the seller. In case you default they could still foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the complete picture. It is better that seller and buyer can 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.