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Are you thinking of investing in real estate? However you don’t have enough cash to do so. In this article is a tip you may use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your best wager is to locate a land that the owner has great desire for offering it, whether because of moving, a divorce settlement, or frustration with tenants.
Actually, if you maybe currently renting and considering using this approach perhaps your landlord would be glad to assist you! There are a few variations that can be used depending on you and your seller. Do they desire the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The simplest method is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the first lender to assume 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 obligations 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 period – 2 or 3 years. Instead of having the money stay in a bank they can be getting a high interest over 2 or 3 years with the remainder due in full at the end of the investment term.
When the term ends you need to be able to refinance the cost, or perhaps you could sell. Unless you strike a real bad market the value of the property should have risen by then.
Most mortgage lenders merely want to make a good investment. While your local bank could still be scared there are plenty 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 property if you default, they do not care what sort of income you make. Conclude the deal with a second mortgage created with the seller. If you default they could still foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can see the entire picture. It is better that seller and buyer can work together. In the event they can’t wait for a sale, you could still give them their asking price with a little overall flexibility on their part.