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Are you thinking of investing in real estate? However you don’t have enough money to do so. Here is a tip you may 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 very best wager is to locate a land that the owner has great desire for selling, whether because they are moving, a divorce settlement, or frustration with tenants.
Actually, if you are currently renting and considering using this approach perhaps your landlord would be happy to assist you! There are some variations that may be used depending on you and your vendor. Do they need the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The simplest method is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to assume the mortgage. If you can’t get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the first mortgage and create a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – 2 or three years. Instead of having the money sit 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 draws to a close you need to be able to refinance the cost, or perhaps you can sell. Unless you hit a real bad market the value of the house should have risen by then.
Most mortgage lenders merely want to make a good investment. While your local bank could still be lacking confidence there are plenty of financial lenders that would like to make a deal. Financiers prefare property investing. The mortgage is mostly based on 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 revenue you make. Complete the deal with a 2nd mortgage done with the seller. In case you default they could still foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can see the entire picture. It is good that seller and buyer may work together. In the event that they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.