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Are you thinking of investing in property? However, you do not have enough cash to accomplish this. In this article is a tip you may use as long as the property seller is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your better gamble is to find a property that the owner has great interest in offering it, whether because of moving, divorce, or they are frustrated with tenants.
Actually, if you are currently renting and considering using this approach perhaps the owner would be glad to help you out! There are a few variations that could be used depending upon you and your seller. Do they desire the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The simplest method is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume the mortgage. If you can’t 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 get a 2nd 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 sit down 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 investment term.
When the term ceases you need to be able to refinance the cost, or perhaps you could sell. Unless you struck a real bad market the value of the home should have risen in that time.
Most mortgage lenders merely need to make a good investment. While your local bank may still be scared there are a lot of financial lenders that would like to make a deal. Financiers prefare real estate. The mortgage is mostly based on 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 sort of money you make. Complete the deal with a 2nd mortgage created with the seller. In case you default they could eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can see the whole picture. It is good that seller and buyer can work together. In the event that they can’t wait for a sale, you could still give them their initial price with a little overall flexibility on their part.