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Are you contemplating investing in real estate? However, you do not have enough money to accomplish this. 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 interested (or even understand) the concept outlined. Your better wager is to locate a land that the owner has great interest in selling, whether because of moving, divorce, or frustration with the folks renting the property.
Actually, if you maybe currently renting and thinking of using this technique perhaps your landlord would be glad to help you out! There are some 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 – 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 first lender to presume the mortgage. If you cannot get approved for an assumable mortgage you could 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 original mortgage and make 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 three years. Instead of having the money sit down in a bank they can be getting a high interest over 2 or 3 years with the rest due in full at the end of the investment term.
When the term ends you should be able to refinance the cost, or you could sell. Unless you strike an actual bad market the value of the house should have risen by then.
Most mortgage lenders merely want to make a great investment. While your local bank could still be scared there are a lot of financial lenders that would like to make a deal. Financiers prefare property investing. The mortgage is usually based on 60-70% of the value of the property, so as long as they know they get their money back in the value of the property if you default, they do not care what sort of money you make. Complete the deal with a second mortgage done with the seller. In case you default they could still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can observe the entire picture. It is better that seller and buyer can work together. If they can’t wait for a sale, you can still give them their asking price with a little versatility on their part.