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Are you contemplating investing in real estate? But you don’t have enough money to do this. Right here is a tip you may use as long as the property seller 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 locate a land that the owner has great interest in offering it, whether because of moving, divorce, or they are frustrated with tenants.
Actually, if you maybe currently renting and thinking about using this approach perhaps your landlord would be glad to help you out! There are a few variations that could be used depending upon you and your seller. Do they need the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The simplest way is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to assume the mortgage. If you cannot get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make payments while the property stays in the seller’s name.
You take over the first mortgage and make a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – two or three years. Rather than having the money sit in a bank they can be collecting a high interest over 2 or 3 years with the remainder due in full at the end of the term.
When the term draws to a close you should be able to refinance the cost, or perhaps you can sell. Unless you struck a genuine bad market the value of the property should have risen in that time.
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 want to make a deal. Financiers prefare real estate. The mortgage is mostly around 60-70% of the value of the land, so as long as they know they get their money back in the value of the property if you default, they don’t care what kind of revenue 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 in the proceeds.
Now you can see the complete picture. It is good 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 overall flexibility on their part.