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Are you contemplating investing in property? However you do not have enough cash to accomplish this. Right here 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 best guess is to find a property that the owner has great interest in selling, whether because of moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you are currently renting and thinking about using this approach perhaps the owner would be happy to assist you! There are a few variations that could be used depending upon you and your owner. Do they desire the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage payments – called ‘assuming’ the mortgage. You will need 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 payments while the property remains in the seller’s name.
You take over the original 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 – 2 or 3 years. Instead of having the money stay in a bank they could be collecting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term ceases you ought to be able to refinance the cost, or you can sell. Unless you hit a genuine bad market the value of the property should have risen by then.
Most mortgage lenders merely need to make a good investment. While your local bank could still be lacking confidence there are lots of financial lenders that would like to make a deal. Financiers like property investing. The mortgage is mostly around 60-70% of the value of the property, so as long as they understand 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 second mortgage created with the seller. If you default they can still foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can see the entire picture. It is good that seller and buyer may work together. In the event they can’t wait for a sale, you can still give them their initial price with a little versatility on their part.