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Are you contemplating investing in real estate? But you do not have enough money to do so. In this article is a tip you may use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your very best guess is to locate a land that the owner has great interest in selling, whether because they are moving, divorce, or they are frustrated with tenants.
Actually, if you are currently renting and thinking of using this technique perhaps your landlord would be glad to assist you! There are some variations that may be used depending upon you and your vendor. Do they need the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The easiest method is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the original lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make payments 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. Rather than having the money sit down in a bank they can be getting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term draws to a close you ought to be able to refinance the cost, or perhaps you can sell. Unless you strike a genuine bad market the value of the property should have risen in that time.
A lot of mortgage lenders merely want to make a good investment. While your local bank may still shy away 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 estate if you default, they do not care what sort of income 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, settling the existing mortgage in the proceeds.
Now you can observe the whole picture. It is good that seller and buyer can work hand in hand. In the event they can’t wait for a sale, you could still give them their initial price with a little versatility on their part.