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Are you contemplating investing in real estate? However you do not have enough money to do so. In this article is a tip you are able to use as long as the person selling the property is willing to negotiate along.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your better guess is to locate a land that the owner has great desire for offering it, whether because of moving, divorce, or they are frustrated with tenants.
Actually, if you are currently renting and thinking about using this strategy perhaps the owner would be glad to assist you! There are some variations that could be used depending on you and your vendor. Do they need the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The easiest method is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume the mortgage. If you cannot get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make repayments 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 period – 2 or 3 years. Instead of having the money sit in a bank they can 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 should be able to refinance the cost, or perhaps you can sell. Unless you struck an actual bad market the value of the property should have risen in that time.
A lot of mortgage lenders merely need to make a good investment. While your local bank could still be scared there are plenty of financial lenders that would want to make a deal. Financiers prefare property investing. The mortgage is usually 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 land if you default, they don’t care what sort of revenue you make. Complete the deal with a 2nd mortgage created with the seller. In case you default they can eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the complete picture. It is good 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.