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Are you contemplating investing in real estate? However, you do not have enough cash to do this. In this article 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 very best gamble is to find a property that the owner has great interest in offering it, whether because they are moving, a divorce settlement, or they are frustrated with tenants.
Actually, if you are currently renting and considering using this strategy perhaps your landlord would be happy to assist you! There are several variations that may be used depending on you and your seller. Do they want the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The simplest method is to consider taking over their mortgage payments – 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 may also try a ‘subject to’ assumption where you merely make obligations while the property stays in the seller’s name.
You take over the first 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 three years. Instead of having the money sit in a bank they can be collecting a high interest over 2 or 3 years with the rest due in full at the end of the investment term.
When the term ceases you need to be able to refinance the cost, or else you can sell. Unless you hit an actual bad market the value of the home should have risen in that time.
A lot of mortgage lenders merely want to make a great investment. While your local bank may still shy away there are lots of financial lenders that would like to make a deal. Financiers like real estate. The mortgage is mostly around 60-70% of the value of the property, so as long as they know they get their money back in the value of the land if you default, they do not care what sort of revenue you make. Conclude the deal with a 2nd mortgage created with the seller. If you default they can eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the entire picture. It is better that seller and buyer can work together. In the event they can’t wait for a sale, you can still give them their asking price with a little versatility on their part.