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Are you contemplating investing in real estate? But you don’t have enough cash to do this. Here is a tip you may use as long as the person selling the property is willing to negotiate with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your very best gamble is to locate a land that the owner has great desire for offering it, whether because of moving, divorce, or they are frustrated with the folks renting the property.
Actually, if you are currently renting and thinking about using this approach perhaps the owner would be happy to help you out! There are a few variations that may be used depending on you and your seller. Do they want the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The easiest method is to consider taking over their mortgage repayments – 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 as well 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 create a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – 2 or three years. Rather than 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 term.
When the term ceases you should be able to refinance the cost, or else you can sell. Unless you hit a genuine bad market the value of the property should have risen in that time.
Most mortgage lenders merely want to make a great investment. While your local bank could still be lacking confidence there are a lot of financial lenders that would like to make a deal. Financiers like real estate. 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 kind of money you make. Conclude 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 off the existing mortgage in the proceeds.
Now you can see the whole picture. It is good that seller and buyer can work hand in hand. If they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.