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Are you thinking of investing in real estate? But you don’t have enough money to accomplish this. In this article is a tip you can 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 locate a land that the owner has great desire for selling, whether because they are moving, divorce, or they are frustrated with tenants.
Actually, if you maybe currently renting and considering using this strategy perhaps the owner would be glad to assist you! There are a few variations that could be used depending upon you and your owner. Do they need the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The easiest way is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the original lender to assume the mortgage. If you cannot get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make payments 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 period – 2 or three years. Instead of having the money stay in a bank they could be getting a high interest over two or three years with the rest due in full at the end of the term.
When the term ends you should be able to refinance the cost, or else you could sell. Unless you struck 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 good investment. While your local bank could still be scared there are a lot of financial lenders that would wish to make a deal. Financiers like real estate. 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 do not care what sort of money you make. Complete the deal with a 2nd mortgage created with the seller. If you default they can still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the entire picture. It is good that seller and buyer may work hand in hand. In the event that they can’t wait for a sale, you can still give them their initial price with a little overall flexibility on their part.