**Editor’s Note: John Hyre will be present at the Think Realty Expo in Dallas, Texas this Saturday, April 29, 2017. Click here for the opportunity to meet him… more
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Are you contemplating investing in property? However, you do not have enough money to do this. In this article is a tip you are able to 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 guess is to locate a property that the owner has great interest in selling, whether because of moving, a divorce settlement, or frustration with tenants.
Actually, if you maybe currently renting and thinking of using this approach perhaps your landlord would be happy to assist you! There are several variations that could be used depending upon you and your owner. Do they need the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The easiest way is to take 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 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 get 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 3 years. Instead of having the money stay in a bank they could be collecting a high interest over two or three years with the remainder due in full at the end of the term.
When the term draws to a close you need to be able to refinance the cost, or perhaps you can sell. Unless you struck an actual bad market the value of the property should have risen by then.
A lot of mortgage lenders merely want to make a great investment. While your local bank could still be scared there are plenty of financial lenders that would want to make a deal. Financiers prefare property investing. 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 income you make. Complete the deal with a 2nd mortgage done with the seller. If you default they could eventually foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see the whole picture. It is better that seller and buyer may work together. If they can’t wait for a sale, you may still give them their asking price with a little overall flexibility on their part.