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Are you contemplating investing in real estate? However, you do not have enough cash 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 guess is to find a property that the owner has great desire for selling, whether because of moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you are currently renting and considering using this technique perhaps the owner would be happy to assist you! There are some variations that could be used depending upon you and your vendor. Do they want the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The simplest method is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the first 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 repayments while the property stays in the seller’s name.
You take over the original mortgage and make a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – 2 or 3 years. Rather than having the money sit in a bank they could be collecting a high interest over two or three years with the remainder due in full at the end of the term.
When the term draws to a close you should be able to refinance the cost, or perhaps you could sell. Unless you hit a real bad market the value of the property should have risen by then.
A lot of mortgage lenders merely need to make a good investment. While your local bank may still be scared there are a lot of financial lenders that would want to make a deal. Financiers like property investing. The mortgage is mostly around 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 don’t care what kind of money you make. Conclude the deal with a second mortgage created with the seller. If you default they could eventually foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can see 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 asking price with a little versatility on their part.