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Are you contemplating investing in real estate? But you don’t have enough money to do this. Here is a tip you are able to use as long as the property seller is willing to negotiate with you.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your better gamble is to find a property that the owner has great desire for offering it, whether because of moving, divorce, or they are frustrated with the people renting the place.
Actually, if you maybe currently renting and considering using this strategy perhaps your landlord would be happy to help you out! There are a few variations that may be used depending upon you and your owner. Do they want the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage payments – called ‘assuming’ the mortgage. You will have 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 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 house with the seller. Offer a high, interest-only payment for a short time frame – 2 or 3 years. Instead of having the money sit in a bank they could 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 ceases you should be able to refinance the cost, or perhaps you can sell. Unless you strike a real bad market the value of the house should have risen in that time.
Most mortgage lenders merely want to make a good investment. While your local bank may still be lacking confidence there are plenty of financial lenders that would like to make a deal. Financiers like real estate. The mortgage is usually based on 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 do not care what kind of money you make. Conclude the deal with a second 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 observe the entire picture. It is good that seller and buyer may work hand in hand. In the event they can’t wait for a sale, you may still give them their initial price with a little versatility on their part.