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Are you contemplating investing in real estate? But you do not have enough money to accomplish this. Here is a tip you may use as long as the person selling the property is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your better gamble is to find a land that the owner has great desire for selling, whether because of moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you maybe currently renting and considering using this technique perhaps the owner would be glad to assist you! There are a few variations that can be used depending on you and your seller. Do they want the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The simplest method 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 can’t get approved for an assumable mortgage you may as well 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 make a second 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 could be collecting a high interest over 2 or 3 years with the remainder due in full at the end of the investment term.
When the term ends you need to be able to refinance the cost, or else you could sell. Unless you struck a real bad market the value of the house should have risen by then.
Most mortgage lenders merely want to make a great 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 usually 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 income you make. Conclude the deal with a second mortgage done with the seller. In case you default they could still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can observe 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 versatility on their part.